Philip Morris ordered to defend fraud suit over U.S. military vendors

WASHINGTON Tue Aug 26, 2014 11:49am EDT

WASHINGTON Aug 26 (Reuters) - A U.S. appeals court on Tuesday revived a lawsuit against Philip Morris USA Inc that claims the tobacco company defrauded the federal government by failing to sell cigarettes to military vendors at the lowest price.

The U.S. Court of Appeals for the District of Columbia Circuit said that a lower court judge should not have dismissed the lawsuit by Anthony Oliver, the president and CEO of Medallion Brands International Co, another cigarette company.

The 2008 lawsuit against Philip Morris, an Altria Group Inc company, concerns cigarette sales to the Navy Exchange Service Command and the Army and Air Force Exchange Service, both of which operate facilities that sell products to military personnel and their families.

Oliver said Philip Morris sold cigarettes to its affiliates at lower rates than those the government paid. The lawsuit claimed Philip Morris charged millions of dollars more each year than it should have.

Philip Morris said in court papers that Oliver is simply a competitor who also sells cigarettes to the military and has "no inside information" about the claims.

In Tuesday's ruling, the appeals court said the lawsuit could proceed because the information on which it was based was not, as the lower court found, already publicly disclosed.

The False Claims Act allows citizens, as well as the government, to bring claims. If they win, they receive a percentage of the damages. Lawsuits cannot be based on information that is already public.

The case is United States of America v. Philip Morris, U.S. Court of Appeals for the District of Columbia Circuit, No. 13-7105. (Reporting by Lawrence Hurley; Editing by Ros Krasny and Grant McCool)