Ottawa caved in to big
tobacco, says ex-official
William Marsden , Canwest News Service
Friday, September 05, 2008
MONTREAL - A former executive
with the holding company that once owned Imperial
Tobacco says the agreement reached in July to settle
federal and provincial claims on smuggling was
little more than "chump change" compared with what
the company earned during the smuggling era in the
late 1980s and early 1990s.
Paul Finlayson, who for 16
years was an executive at Imasco, which once owned
Imperial, said the government basically caved in to
tobacco interests when it made what he claimed was a
token settlement with Imperial and Rothmans Inc.
Finlayson said Imperial earned
$600 million to $700 million a year during the
smuggling era when the company "lubricated" a system
that defrauded Canadian governments of billions of
dollars in unpaid taxes.
Now retired, he said in an
interview that the $600-million settlement with
Imperial represents a small fraction of the profits
Imperial earned during that period and an even
smaller fraction of the taxes and duties governments
lost to smuggling.
Finlayson said, however, that
the company set up shipments to warehouses in the
U.S. so that its cigarettes could be easily sold to
He said in 1988 Imperial began
to see a dip in profits because its competitors were
winning market share by feeding the smuggling
market. So, he said, Imperial decided to jump in.
Finlayson, who managed
operational systems at Imasco, said he prepared the
operational plans for sending Imperial cigarettes
tax-free into the United States, where they were
later sold to smugglers who brought them back into
Canada through the Akwesasne Six Nations reserve
near Cornwall, Ont.
He said the documents he
prepared in the early 1990s were "confidential
mathematical planning documents" for the "flow of
goods" into the U.S. - or in other words, plans for
supplying smugglers. The RCMP seized the documents
from Imperial's Montreal head office in November
The documents showed that not
only could Imperial regain its market share but it
also could save money simply by "lubricating what
was already happening" in the smuggling networks.
The company had to balance the
huge demand for Imperial's popular brands, which
sold for a premium on the black market, against the
possibility it could "piss off Revenue Canada," he
said, but added, "We didn't think the government
would have the balls to come after us."
He said his planning document
basically proved that Imperial was intentionally
sending cigarettes into the U.S. to be sold into the
"The RCMP knows all about this.
They could have walked in and just handcuffed
everybody at Imperial," he said, adding that the
government did "not have the guts of a field mouse
to go after the executives of the company."
He said he was speaking out
because he believes Imperial crossed the line. He
said he left Imasco during that period, because "the
envelope was being pushed a little bit beyond what I
could tolerate it being pushed."
No executives at Imperial or
Rothmans have ever been charged with smuggling. The
agreement signed last month settled all claims.
Imperial Tobacco, as part of
last month's settlement with the government, pleaded
guilty to one charge of violating the Excise Act and
paid a fine of $200 million. Imperial also agreed to
pay $50 million by the end of this year plus a
percentage of its net sales revenue over the next 15
years up to a maximum $350 million.