Monday, 11 March 2013

Day 123: Wayne Knox. "Brilliant!"

The entrance to Montreal's courthouse, the Palais de Justice, was surrounded this morning by TV crews. The media had come out for the preliminary hearing of Luka Magnotta, the accused in a sensational case of murder and dismemberment.

Meanwhile, in a courtroom several floors above the area secured for criminal trials, the Montreal tobacco trial completed its first year of hearings in its own dramatic way.

Mr. Wayne Knox, the former head of Imperial Tobacco's Planning Group, returned today to pick up where he had left off on February 14th - testifying about the operations of Imperial Tobacco's distinctive integrated approach to marketing. (Before the start of this morning's session he kindly drew me an organigram showing how this structure improved on the traditional "Proctor and Gamble" model of brand-management.)

Mr. Knox continued to provide his one-of-a-kind flavour to this trial. He appeared to welcome the questions put by the plaintiff's usually-hard-line Bruce Johnston, and seemed eager to educate the judge and lawyers about the inner workings of the firm. His pride in his work and the accomplishments of the planning group were evident.

The result was an interview that could have been mistaken for a university lecture on cigarette marketing in the 1970s and early 1980s, as illustrated through Mr. Knox's old files.

The almost-conversational tone of the day was emphasized by the unusual silence from Imperial Tobacco's lawyers. They continued to keep a distance from this witness, and let objections go unvoiced rather than give him a cue for further comment. (I think that Ms. Glendinning made only one objection.) A few times I wondered whether Mr. Johnston was deliberately taunting her as he took some questions over the lines that she usually fiercely defends.

In his wide-ranging testimony, Mr. Knox sometimes reinforced and sometimes refuted the testimony of others. Often he added details to information already before the trial.

He told the court:

* Project Huron and Project Erie, both of which aimed to find a cross-over cigarette using American-tasting burley tobacco, were named after the lakes that joined the two countries.

* Imperial Tobacco was interested in "all kinds of filters" as part of its efforts to find the "Holy Grail" of a cigarette that was "still satisfying" but "better for you."

* Constraints on advertising budgets that resulted from an agreement with government put increased emphasis on developing products before marketing. The company usually had 10 to 15 projects in the hopper, even though it could only launch 2 or 3.

* The reinforcement of the social acceptability of smoking was a "natural, unavoidable by-product" of lifestyle ads for cigarette brands, but such promotions were "not done on purpose."

* Maintaining social acceptability was not a goal of branded -advertising, but "a more overall kind of a thing. Our general activities would support these kinds of phenomenon."
Fiscal 82 marketing plans (Exhibit 292-82)

* Imperial Tobacco was the "only company that measured [smoking among those] under 18... This was the single largest thing that made Players Light such a success."

* The company never researched or targetted youth who didn't smoke but "it didn't mean we weren't interested! We were very interested."

* Imperial Tobacco used sports to promote its brands because of the appeal to young males. "They were young. They were male. They were in arenas. That’s where we spent our money."

* There was no way the company could prevent advertising from having an impact on non-smokers. "If they had magazines for only smokers, we could have advertised there. You are forced to expose your advertising to non-smokers, not because we wanted to but because we had no choice."

* Lower tar cigarettes made it easier for smokers to quit, as the "step down" was less than for a high-tar cigarette. "Forty-eight percent of Canadians have quit smoking... they didn't have to be tied down in a spa in California to do it...  We didn't get much credit for that."

* The allaying of concerns about smoking after the marketing of low-tar brands was "a by-product of providing smokers what they wanted to smoke. The Surgeon General's reports talked of excessive smoking – the more you smoked the more dangerous it was. They didn’t say the corollary  - that the less you smoked and the lower the tar, the less harmful."

Strong evidence becomes stronger

Mr. Knox was able to speak on behalf of several documents that had been introduced to the trial under the May 2nd judgement, and thus allowed the "2M" to be removed from these records. Among such exhibits were his own reflections in 1976 on "why people smoke" (Exhibit 1041), and a 1973 reflection on whether smokers compensated for lower tar-nicotine delivery by increasing the number of cigarettes they smoked. (Exhibit 1022).

One of these promoted documents is a partial record of a 200+ page history of the company which Mr Knox said today he had authored. (Exhibit 1007). Justice Riordan voiced my thought "why is this confidential?" and was told by Mr. Lespérance that an agreement had been reached to argue its confidential status later. Intriguingly, Ms. Glendinning volunteered that additional parts of this record had been located and forwarded to the plaintiffs. This is one to watch for!

Everyone has a favourite exhibit - this is mine

One of the new exhibits presented today (Exhibit 1448) was a position paper authored by Mr. Knox shortly before he left the company in 1985.

This is a hand-wringing projection of a bleak future for the company and a plea for it to reorient its approach. The 10 page paper was found at BAT's Guildford depository in 1999, tucked among other records brought back by marketing psychologist Bob Ferris after his visit to Mr. Knox and others to discuss Project Viking.

Mr. Knox explained that this document "was written at at time when the industry finally peaked ... none of us knew how fast it was going to decline. A lot of us were writing think pieces of what it might look like."

Mr. Knox provided a graphic snapshot of the Canada's dwindling smokers and urged the company to look beyond "shorter term market share growth" and instead focus on "longer-term profitability." 

He suggested that against a worst case scenario of there being no smokers in 2020, the company should set the objective that smoking rates went no lower than 35%, and that only 60% of Canadians thought that smoking was "dangerous for anyone." 

The cross examination

The extent of Imperial Tobacco's aversion to Mr. Knox's testimony was reflected in their decision to not put any questions to him about his comments over the two days of his testimony. In a brief cross examination, Ms. Glendinning asked only for Mr. Knox to confirm that the two of them had met for about an hour and a half before he had been subpoenaed, and that after he received a subpoena he had refused her invitation to meet.

Me thinks the meeting with Ms. Glendinning must have gone badly. Mr. Knox had worked with Imperial Tobacco's lawyers in other litigation efforts, and earlier testified he had consulted to the company up until 14 months ago. Today he was very friendly with Imperial Tobacco's former lawyer, Simon Potter (Mr. Potter now works for Rothmans, Benson and Hedges).

During the lunch break, Mr. Potter looked uncomfortable as Mr. Knox encouraged him in front of an elevator full of court observers to ask questions about a "funnel" diagram he had once drawn for Mr. Potter to describe documents that were generated by students and others contract workers who had little decision-making power. Low and behold, two hours later, when Mr. Potter had his opportunity to question Mr. Knox, the same questions were asked.

Humour is in the eye of the beholder

There were many light moments to the day. Unsure of how to categorize Exhibit 1448, Mr. Johnston had asked the witness how he "would describe the document." -- "Brilliant" was the amusing, if not modest, reply.

There was much laughter as well when he provided an answer to a seemingly innocuous question about how Imperial Tobacco's library was organized.

"Badly," he said baldly, and then explained his own view of the ITL's librarianship. "I had a messy office. People told me I should turn things over to the library, and I said that if I do I will never find them again."

Unprompted, he waded into the topic of document destruction. "They wanted to destroy documents because they were running out of room. I always used to say no, it drove them nuts. The library people didn’t like me very much. I didn’t like them very much." 

Justice Riordan gave Mr. Knox an uncommon compliment when thanking him for his time on the stand. "I have really enjoyed listening to you."

The defense side did not seem to share the sentiment.

A costly objection

Mr. Knox was not on the original schedule of plaintiff witnesses, and only testified in the trial as a result of Imperial Tobacco's actions. During the very first attempts to introduce documents under the 2870 rule, the plaintiffs had proposed for a letter from (deceased) Bob Bexon to (the not-found) Mr. Knox to be introduced. (Exhibit 267)

"The author is dead, but the recipient is not dead," Ms. Suzanne Côté objected on December 13. "I am told that Mr. Knox, unless he died yesterday, is still living."

Philippe Trudel had pressed for more information, and Suzanne Côté had little choice but to undertake to find out. A month later (January 14th), she invited Justice Riordan to order her to provide the address for Mr. Knox. The rest, as they say, is history.

The Bexon letter that Suzanne Côté tried to block is a damning piece of evidence - it calls for actions to change attitudes to being "more conducive to continued tobacco use" and to "initiate projects to insure the continued uptake of tobacco products by young Canadians." But forcing the plaintiffs to find Mr. Knox served only to put more damaging evidence on the record.

The Wells Pritchard Memo: An important detail in the document destruction story. 

The long-awaited discussion of the status of a 1989 memo from Brown and Williamson counsel, JK Wells III to the company president, R. Pritchard, took place today.

In the morning, André Lespérance explained why he felt that there should be no privilege granted to this document, especially in light of Justice Riordan's ruling on privilege related to David Flaherty's reports. He provided information on decisions of other courts -- where the privilege had not been claimed (during the US DOJ case), and where, he said, it had been granted (State of Washington) for reasons not relevant to the Blais-Letourneau cases.

In the late afternoon, Deborah Glendinning argued that the privilege had never been waived in the U.S., but that the document became public because it was a "compelled production." She wrapped her argument tightly in the corporate veil, stressing that the document and the events it detailed had nothing to do with Imperial Tobacco, as they concerned BAT and Brown and Williamson. "It wasn't us.... They were talking amongst themselves. Imperial never got a copy."

Justice Riordan looked very pensive throughout these arguments, and said he would reflect and may or may not give his decision tomorrow.

More 2870 documents

With slightly less than an hour in the sitting day, the court returned to the review of the last remaining documents on the plaintiff's most recent list of 2870 documents, which was first discussed last Friday.

Today, the mood seemed slightly better. The objections were more perfunctory, and the process went more smoothly. At least a score of documents were upgraded from "2M" status, and only a few were refused.

One of the criteria Justice Riordan had established in his earlier rulings was that draft documents could not qualify under this process. Over the past couple of days, the judge has been able to disabuse the companies' lawyers that proposals, "tentative agendas" and letters written in the conditional or subjunctive tenses do not qualify as drafts.

As the judge put it today: "For goodness sake!!!"

Tomorrow, the plaintiffs' expert polling witness, Christian Bourque, will return to present his amended report. On Wednesday and Thursday, William Farone will testify.