Ottawa back in court against tobacco firms By KIM LUNMAN Globe and Mail Update Aug. 14, 2003
OTTAWA — The federal government resurrected its legal battle against Big Tobacco yesterday to recover $1.5-billion in taxes it claims it lost to a cigarette smuggling scam during the early 1990s. "We allege [the tobacco companies] devised and implemented a scheme to make illicit profits out of the smuggling trade," said Gordon Bourgard, a Justice Department spokesman. The lawsuit, filed in Ontario Superior Court in Toronto, alleges that R.J. Reynolds and Japan Tobacco groups of companies were behind the scheme. The companies named as defendants include: R.J. Reynolds Tobacco Holdings Inc., R.J. Reynolds Tobacco Co., R.J. Reynolds Tobacco International Inc., JTI-Macdonald Corp., Northern Brands International Inc., Japan Tobacco Inc., JT International SA, JTI-Macdonald TM Corp., JT Canada LLC II Inc., JT Canada LLC Inc., JT International Holding B.V., JT International B.V. and JT International (BVI) Canada Inc. In a statement issued last night, JTI-Macdonald Corp. called the government's latest lawsuit "ill conceived," noting that it had already spent $20-million on a similar claim in the United States that was dismissed. "These worn-out allegations are being pumped up by an overzealous antitobacco lobby whose very existence depends on repeatedly attacking the Canadian tobacco industry." In December of 1999, Ottawa filed a lawsuit in the United States against RJR-Macdonald Inc., claiming $1-billion (U.S.) in lost tax revenue stemming from alleged cigarette smuggling by RJR affiliates. The U.S. Federal Court dismissed the suit, stating that U.S. courts can't be used to collect taxes for another country. A U.S. appeals court later declined to hear the case and a final appeal to the U.S. Supreme Court was rejected last November. The new lawsuit alleges that the defendants used the St. Regis Mohawk/Akwesasne reserve on the Canada-U.S. border as "a funnel for the smuggling of RJR-Macdonald's tobacco products. "The conspirators [RJR-Macdonald and RJR International] agreed and conspired together to implement an unlawful scheme, the purpose of which was to injure the plaintiff, deprive the plaintiff of excise and import tax revenues and force the rollback of Canadian excise taxes and duties." In the early 1990s, increased taxes in Canada doubled the price of cigarettes. Tobacco products cost half as much in the United States, creating a huge black market for the product. "This is good news," said Garfield Mahood, executive director of the Non-Smokers' Rights Association, which has been lobbying the government to pursue the case. "The health community is extremely pleased the Attorney-General has filed this lawsuit." In March, eight top tobacco executives with JTI-Macdonald Corp. (formerly known as RJR-Macdonald) were charged in Toronto with fraud and conspiracy after a four-year RCMP investigation into what has been described as "an unholy alliance" between the tobacco giant and smugglers. Ottawa launched the first lawsuit with fanfare in late 1999, alleging that the company ran a vast illegal smuggling operation designed to thwart federal efforts to deter Canadian teens from smoking. According to court documents, Ottawa alleges that the tobacco company and related firms began extensive smuggling operations in the early 1990s that involved shipping products to the United States and then smuggling them into Canada through the St. Regis Mohawk reservation. Mohawk territory -- the St. Regis reservation in New York state, the Akwesasne reserve on the Canadian side -- straddles the international border and the Quebec-Ontario boundary.
