A federal appeals court ruled Friday that government cannot force the tobacco industry to surrender $280 billion in past profits that were allegedly earned by fraud from sales of cigarettes. The decision is a major setback for the government�s case, which is the largest civil racketeering trail in U.S. history.

The U.S. Court of Appeals for the District of Columbia ruled that the civil Racketeer Influenced Corrupt Organizations Act (RICO) does not permit the government to seek disgorgement of past revenues and profits as a remedy in its case against the six largest tobacco companies.

The 2-1 decision by the three-judge panel overturned a lower-court judge who agreed with the government that forcing the tobacco makers to give up $280 billion in past profits was a remedy under RICO, the law the Justice Department sued under.

“The specific civil RICO provision that the government has invoked does not allow for an award of disgorgement,” William S. Ohlemeyer, Altria Group, vice president and associate general counsel, said. Ohlemeyer also noted that for the government to obtain any other remedy under the civil RICO statute, it must not only prove that the companies have engaged in fraudulent behavior in the past, but that they are likely to do so in the future.

The government alleges that chief executives from the defendant companies met on December 15, 1953 at the Plaza Hotel in Manhattan where they allegedly agreed to conduct false and misleading public relations and advertising campaigns to deceive consumers and others about the health effects of cigarettes in order to protect their profits.

(via Philip Morris USA)