How Big Tobacco lobbies to safeguard e-cigarettes

Introduction

SACRAMENTO, Calif. ­— In the Golden State, home to healthy living, progressive politics and one of the lowest smoking rates in the nation, cigarettes can seem like a relic of the past, barred long ago from restaurants, bars and even some city parks.

And yet within the walls of California’s high-domed capitol, tobacco companies continue to wield surprising power. After a recent loss on a slate of tobacco control bills headed to the governor’s desk, they are gearing up for a bigger test looming at the ballot this fall. With money to spend, they have threatened to sabotage a planned ballot measure to raise the cigarette tax.

The battles aren’t just here. Despite the tobacco industry’s tarnished public image, it is operating a powerful and massive influence machine in statehouses from Salt Lake City to Topeka. With a playbook crafted nearly 20 years ago, the tobacco firms use direct lobbying, third-party allies and “grassroots” advocacy campaigns to spread model legislation and mobilize smokers against proposed regulations and tax hikes across the country. And they are taking up the mantle to defend a burgeoning electronic cigarette market as well.

Today, tobacco companies maintain some of the most extensive state lobbying networks in the country, totaling hundreds of lobbyists. Altria Group Inc. and Reynolds American Inc., which control the vast majority of the American tobacco market, are among just 21 entities that had registered lobbyists in every state at one point from 2010 through 2014, according to a Center for Public Integrity analysis of lobbyist registrations collected by the National Institute on Money in State Politics.

They’ve also given at least $63 million to state candidates, committees and ballot initiatives nationwide over the past five years.

Their chief opponents, the American Cancer Society and American Heart Association, also have similarly broad lobbying networks, but the health associations have given hardly any money to state politicians.

With such extensive reach, tobacco companies have continued to fight off the simplest means of cutting smoking rates: higher taxes. Out of 24 states to propose higher cigarette taxes last year just eight passed increases, according to a tobacco industry group. And only Nevada, with a $1-per-pack hike, raised them by more than 50 cents. Health groups say incremental tax hikes of less than $1 are much less effective at cutting smoking rates because tobacco companies can easily counteract them with rebates and discounts.

E-cigarettes are the newest front in this multi-faceted war. While the Food and Drug Administration has announced plans to regulate e-cigarettes, for now it remains up to states to impose any regulations or taxes on the emerging products. So far, e-cigarette taxes have passed in only four states, while proposals have been defeated in at least 21 others. The tobacco industry, which is increasing its share of the new market, has also won language in at least 19 states in recent years making it harder to regulate and tax e-cigarettes under existing anti-smoking laws.

David Sutton, a spokesman for Altria, the parent company of Philip Morris, said his firm is generally opposed to taxes on its products and becomes politically active where necessary. Reynolds declined to answer specific questions for this article, pointing instead to its website, which says the company engages in lobbying and makes lawful political contributions to protect the interests of its business.

“The tobacco companies never give up,” said Stanton Glantz, a professor at the University of California, San Francisco’s Center for Tobacco Control Research and Education. “They’re like the Borg,” the indomitable alien horde of “Star Trek” lore.

“Raising money to get into elected office is a component of what we have to do… And frankly, I’m a pretty aggressive fundraiser.”

California Assembly member Adam Gray

‘Where tobacco bills go to die’

Nowhere has the tobacco fight been bigger, or more expensive, than in California, which has attracted at least two-thirds of tobacco companies’ state-level political donations since 2011. Public health advocates here say tobacco companies have used a potent combination of campaign contributions and behind-the-scenes lobbying to win enough friends in key places.

The strategy is most apparent on the Assembly’s Governmental Organization Committee, which oversees an odd combination of issues, including public records, state holidays, gambling, alcohol and tobacco.

Its chairman, Assembly member Adam C. Gray, a Democrat from Merced who has served on the committee since 2013, has accepted $88,100 in political contributions from Altria and Reynolds since he began campaigning for office in 2011, far more than any other member of the Legislature.

The two companies have directed some $390,000 in total to members who sat on that Assembly committee, a quarter of the money they’ve given to all legislative candidates and their committees in California over that period.

The large amount of money given to its members has prompted some to call it the “Juice Committee.” Health advocates call it “the committee where tobacco bills go to die.”

The committee has watered down or killed nearly every major tobacco bill that’s come through it in recent years, anti-smoking advocates say, including a recent attempt in July to regulate e-cigarettes.

In an unusual move, an identical e-cigarette bill and five other tobacco measures were reintroduced in a special session the following month to allow the legislation to sidestep Gray’s committee. They passed the Legislature this month, the first significant tobacco control bills to pass since the 1990s, a marked blow to the usually successful tobacco industry.

“Money has no influence on what goes on with policy. It just doesn’t,” Gray said. “Raising money to get into elected office is a component of what we have to do… And frankly, I’m a pretty aggressive fundraiser.”

Lawmakers and other Sacramento insiders point out that the direct contributions, which are subject to strict limits, are minimal compared to the money spent by independent political groups, which can raise and spend unlimited sums to support or oppose candidates as long as they do not coordinate with the candidates. Tobacco companies have given some $4.8 million to such independent political committees and parties in California since 2011, nearly three times as much as they gave directly to candidates.

“We provide contributions to candidates and elected officials who, in their work legislatively are at work on issues that have an impact on our business,” said Sutton, the Altria spokesman.

Altria and Reynolds have also spent some $5.4 million on lobbying in California since 2011. By comparison, the health groups that supported stronger tobacco regulation have spent some $2.7 million over the same period, though they lobby on many other issues as well.

“There’s a reason people spend money on that,” said Gary Winuk, who served for six years as the state’s lobbying and campaign finance enforcement officer before leaving for private practice last year. Winuk began his career working for a lawmaker on the Governmental Organization Committee decades ago, and said it was the behind-the-scenes maneuvering and power plays he saw there that made him want to work for the state ethics agency.

Preserving tobacco’s role

In 1999, R.J. Reynolds, now a division of Reynolds American, produced a memo describing a strategy to “preserve the company’s role and participation in U.S. commerce.” The document, archived at the University of California, San Francisco, included the company’s state lobbying objectives, chief among which was a plan to hire lobbyists in “as many states as possible,” as the company’s first “line of defense.”

Next was a commitment to make “appropriate political contributions and support key trade groups and allies,” adding, “there is an old saying in politics. ‘Money talks and bullshit walks’… It is especially true when dealing with tobacco issues.”

The third component of the lobbying strategy was to “execute grassroots mobilization of trade groups, smokers and other allies.”

Nearly two decades later, the company is still using the same roadmap. And smoking continues to be the leading cause of preventable deaths, killing nearly half a million Americans every year, according to the Centers for Disease Control and Prevention.

Reynolds and Altria employed a team of more than 450 state lobbyists in 2014, together retaining representatives everywhere but Nevada, according to an analysis of state records and data collected by the National Institute on Money in State Politics. They’ve also continued to work through trade organizations and advocacy groups.

When Kansas Gov. Sam Brownback proposed an increase of $1.50 per pack for traditional cigarettes last year to help fill a budget gap, Reynolds hired David Kensinger, who had served as the Republican governor’s chief of staff until leaving to work as a lobbyist in 2012. Weeks earlier, Kensinger was among a select group of insiders who received advance copies of Brownback’s proposed budget, which included the tax hike, before lawmakers did, according to The Wichita Eagle. Both Kensinger and Reynolds declined to comment on what happened.

Reynolds reported buying more than 350 meals for public officials and giving e-cigarettes to four House members in Kansas last year, according to state lobbying records, while Altria spent $283,000 on advertising and other outreach.

Meanwhile, a group called Citizens for Tobacco Rights, an advocacy campaign run by Altria, blasted emails to its members, in one instance urging them to fight the tax by posting messages on the Facebook pages of their lawmakers. It’s a standard tactic of the group, which claimed to have generated more than 33,000 phone calls and 52,000 emails and letters to legislators in 2014.

Lawmakers eventually approved a tax increase of only 50 cents, a third of the original proposal. Kansas continues to struggle with a $46 million budget deficit this fiscal year.

“You build this infrastructure for regulating e-cigarettes on a faulty promise that they’re somehow a healthy product.”

Timothy Gibbs, lobbyist for the American Cancer Society Cancer Action Network

Protecting a smokeless future

Reynolds, too, has its own “grassroots” advocacy campaign, called Transform Tobacco. And as the name suggests, a new product is increasingly drawing the company’s focus.

The e-cigarette was invented in 2003 in China and started appearing in this country not long after. It’s gained an enthusiastic community of users, and by 2013 some 20 million adult Americans reported trying e-cigarettes, which vaporize a liquid such as propylene glycol mixed with flavorings and usually nicotine, the key addictive chemical in cigarettes that is generally derived from tobacco.

E-cigarettes come in a huge range of varieties. One major brand charges about $10 for a disposable sleek black pen-like device that lasts about as long as two packs of cigarettes. But many “vapers” use so-called mods or tanks, bulkier refillable devices that can cost anywhere from $30 to well over $100. Users then buy separate vials of “e-juice,” with names like Cinnamon Crumble and Unicorn Milk, which typically sell for about $20 per 30-milliliter vial.

Sales of e-cigarettes reached $3.3 billion last year, according to Wells Fargo Securities, and may surpass those of traditional cigarettes within a decade. While tobacco companies still control less than half of this market, they’ve begun buying up or starting their own e-cigarette brands in recent years, rapidly increasing their share.

Reynolds, a leader in the e-cigarette market, has promoted model legislation that says explicitly that e-cigarettes are not tobacco products. The Center for Public Integrity obtained a template copy of the model language that was circulated at one of dozens of youth tobacco prevention “dialogues” that Reynolds has held around the country in recent years for local health officials and advocates. The company offered to pay as much as $1,000, plus lodging, to those who attended, according to invitations the Center obtained.

So far, such model language has passed in at least 19 states, written into laws banning sales to minors. At least 11 of those passed laws that pull nearly verbatim from the Reynolds template, while at least eight others have enacted similar language that health groups say was promoted by Lorillard Tobacco, which Reynolds bought last year.

Tobacco companies have won legislative language in at least 19 states that protects e-cigarettes from tobacco control programs and cigarette taxes. At least 11 of those pull nearly verbatim from template language written by Reynolds American Inc., which sells the VUSE e-cigarette. Below is an excerpt from Reynolds’ template, which was obtained by the Center for Public Integrity, together with matching excerpts from the state laws, all of which ban sales of e-cigarettes to minors. Click on the bill titles to see larger versions.

Pennsylvania and Michigan, the only states that do not prohibit sales to minors, have two bills pending with similar language.

Although Reynolds’ model language asserts that e-cigarettes are not tobacco products, the company’s own website describes its VUSE e-cigarette as exactly that.

The most immediate effect of the bills is to protect e-cigarettes from existing tobacco control programs and taxes. E-cigarette proponents say the alternate definitions are warranted because the products do not burn tobacco. But health groups warn that the definitions pushed by the industry will harm the public.

“You build this infrastructure for regulating e-cigarettes on a faulty promise that they’re somehow a healthy product,” said Timothy Gibbs, a lobbyist for the American Cancer Society Cancer Action Network in California and a chief shepherd of the tobacco control bills there. “While the scientific consensus is that they may be safer than traditional cigarettes, that doesn’t mean they’re safe.”

It seems likely that “vaping” is less harmful than smoking. The question is by how much. The Centers for Disease Control says e-cigarettes “generally emit lower levels of dangerous toxins” than cigarettes, but can also release carcinogenic compounds and heavy metals. The agency says that e-cigarettes could provide a public health benefit if they lead smokers to quit. But it suggests that isn’t happening — about three-quarters of e-cigarette users also smoke cigarettes — and the products may be harmful if they prolong smokers’ addiction.

State Sen. Mark Leno, a Democrat who sponsored the recently approved California bill that defines e-cigarettes as tobacco products, said their popularity among youth — some 2.4 million middle and high school students were using e-cigarettes nationally in 2014 — means the devices present a new health crisis. He likens today’s fight to what happened with smoking in the mid-20th century, when tobacco companies began a decades-long campaign to discredit the emerging science showing the lethal and addictive qualities of cigarettes.

“They knew 50 years ago what they were doing,” Leno said. “And they’re doing it again today.”

Reynolds declined to answer questions about the model legislation or the dialogues, pointing instead to a company webpage that explains its “transforming tobacco” initiative, which promotes youth prevention programs and argues that smoke-free products, including e-cigarettes, can reduce “the death and disease caused by cigarettes.” Health advocates say the company has insidiously used this campaign in its efforts to win legislation protecting e-cigarettes from harsher regulation.

Altria declined to answer whether it has lobbied in favor of the language.

Vapers fight back

In California, the full weight of state government has gotten behind a campaign to rein in e-cigarette use. Last year, the state public health department warned of the dangers of the product and recommended strict regulations, launching a website and ad campaign called Still Blowing Smoke. This month, with passage of Leno’s bill, the Legislature took a big step in that direction.

Yet the state has met formidable resistance not just from the tobacco industry but also from a fledgling industry of smaller e-cigarette manufacturers and retailers backed by a passionate movement of vapers. Mobilized around the country, these e-cig aficionados have protested in Salt Lake, circulated petitions in Washington state and flown to the nation’s capital to push their position with congressional leaders.

Within hours of the launch of the state’s Still Blowing Smoke campaign last March, for example, another website called NOT Blowing Smoke popped up, using a similar font and logo but blasting the department for peddling misinformation.

Stefan Didak, a 44-year-old software engineer and co-president of the Northern California chapter of the Smoke-Free Alternatives Trade Association, a vaping industry group, had learned that the health department was planning the campaign and spent 36 hours holed up in his home office, a dark room with an array of 12 monitors, 14 computers and a plastic rack holding dozens of e-cigarettes. In a savvy guerrilla tactic, he beat the department to registering social media accounts, so the Still Blowing Smoke Facebook page and Twitter handle lead to content by NOT Blowing Smoke.

“Yeah, that was fun,” Didak said from his split-level home in Oakley, a city on the eastern edge of the Bay Area. Didak, dressed all in black, wore a NOT Blowing Smoke T-shirt and held a black mod e-cigarette, the type preferred by hard-core vapers. The blinds were drawn and the air held the faint sweet odor emitted by his mod, which he sucked on periodically, blowing out thick clouds of “ripe strawberry shortcake” flavored vapor.

SFATA Executive Director Cynthia Cabrera says her group was not affiliated with the counter-campaign. The association hired lobbyists in Sacramento to oppose Leno’s bill and has urged Gov. Jerry Brown, a Democrat, to issue a veto.

Didak said that bill would drive small vape shops and liquids manufacturers out of the state — or out of business — by applying the various licensure and regulatory requirements that apply to tobacco. As someone who quit cigarettes thanks to vaping, he said that restricting the industry would harm public health.

Didak and other vapers stress that they are not “big tobacco” and that SFATA does not receive money from tobacco companies. “We don’t regard them as part of us,” Didak said.

In coming months, however, they’ll be on the same side.

A bold threat

Whether Brown signs Leno’s e-cigarette bill, part of the package of six tobacco measures the Legislature passed this month, an expensive fight looms in California’s freewheeling ballot initiative process.

A coalition of health and labor groups, with support from liberal billionaire Tom Steyer, is currently gathering signatures for a ballot initiative that would hike the state’s cigarette tax by $2 and levy an equivalent tax on e-cigarettes. At 87 cents, California’s current tax is well below the national average.

Yet that effort may be in jeopardy.

This month, a lobbyist for Altria sent a bold threat in an email first published by The Sacramento Bee: the company plans to try to repeal some of the tobacco bills it had opposed by putting them before voters in a referendum on this fall’s ballot. In a calculating political move, it also threatened to corner the all-important ballot measure market of professional signature gatherers by paying top dollar. That could price out the health groups from their cigarette tax campaign and imperil all other measures trying to make the ballot, including an extension of a key tax increase known as Proposition 30.

“When we hit the street with referendum paying $10 per signature, Prop 30 is dead as well as $2 a pack tax,” warned Altria lobbyist George Miller IV, son of the former Democratic California congressman. “We will have every signature gatherer on an exclusive. Just letting you know so you can’t say you were not warned.”

The health groups say they could be forced to either up their own prices, which are now about $4 per signature, or rally volunteers instead.

“We’re appalled but not surprised,” said Gibbs, the Cancer Society lobbyist, adding that tobacco companies have a history of particularly ruthless tactics. “They seem to be throwing a fit.”

Miller did not respond to requests for comment. Sutton, Altria’s spokesman, called Miller’s message “simply a friendly heads-up email between long-time colleagues.”

No matter whether Altria follows through on its threat, the coming months are sure to see many millions of dollars spent on all sides. Health groups have already raised $4 million for their campaign. During two previous attempts to raise cigarette taxes at the ballot, in 2006 and 2012, Reynolds and Altria spent more than $113 million and defeated both measures.