RCMP search Rothmans offices ;
Investigators widen cigarette smuggling probe;
Joe Schneider. Toronto Star. Toronto, Ont.: Jan 19, 2002. pg. C.10
Rothmans Inc.'s offices were searched by
federal investigators seeking records of the company's U.S.
exports between 1989 and 1996, when smuggling of cigarettes from
the United States to Canada was at its peak, the company said
Investigators from the Royal Canadian
Mounted Police searched the company's offices in Toronto Thursday
and again yesterday, Rothmans spokesperson John McDonald said.
Offices in Brampton and Quebec city were searched today.
Canadian tobacco exports to the United
States rose significantly in the early and mid-1990s when federal
and provincial taxes pushed the price of a package of 25
cigarettes to about $7 in Ontario. Lower tax levels in the U.S.
allowed smugglers to buy the cigarettes in border cities, bring
them back to Canada, and sell them for below- retail prices while
still making a profit.
"We are co-operating with the RCMP, and we
know that their review and their investigation will confirm that
Rothmans Benson & Hedges operations have been properly conducted
at all times," McDonald said.
The RCMP confirmed a search warrant was
executed. Investigators won't discuss the search because the
warrant is under judicial seal, meaning none of the information
can be made public, police spokesperson Michelle Paradis said.
Imperial Tobacco Canada Ltd., a unit of
British American Tobacco PLC, and JTI Macdonald Corp., Canada's
two other biggest tobacco manufacturers, said the RCMP hasn't
asked to search their offices or seized any documents.
Rothmans shares rose 53 cents to $29.89
yesterday in Toronto.
The raids on Rothmans offices are probably
part of a much larger investigation extending beyond North
America, said Francis Thompson, policy analyst at the Non-Smokers'
Rights Association, a Canadian group that lobbies for higher
tobacco taxes and greater government restrictions on sales.
Canada filed a $1 billion lawsuit in
December, 1999, against RJR- Macdonald Inc. and Canadian tobacco
manufacturers, accusing them of conspiracy in cigarette smuggling.
The case was dismissed by U.S. federal judge Thomas McAvoy, who
said U.S. courts can't be used to collect taxes for another
country. A U.S. appeals court declined to hear the case last
month. Canada hasn't said whether the decision will be appealed to
the U.S. Supreme Court.
Credit: bloomberg news
RCMP lays criminal charges against
Canadian tobacco company
Canada NewsWire. Ottawa: Feb 28, 2003. pg. 1
TORONTO, Feb. 28 /CNW/ - After a four and a
half year criminal investigation into allegations of the Canadian
tobacco industry's complicity in smuggling contraband tobacco
products from the United States into Canada, the RCMP has laid six
counts of Fraud and one count of Conspiracy to Commit Fraud and to
Possess Proceeds of Crime against a major Canadian tobacco
manufacturing company and a number of its' subsidiaries and
current and former senior executives.
These charges are laid under Section 380
(1) (a) and Section 465 (1) (c) of the Criminal Code of Canada.
The charges pertain to activities of the company, its affiliates,
its senior officers and others involved in the smuggling of
contraband Canadian blend tobacco products between 1991 and 1996
The companies charged are:
JTI-MACDONALD, CORP., formerly known as
RJR-Macdonald, Inc., Toronto, Ontario.
R.J. REYNOLDS TOBACCO CO., (Delaware),
R.J. REYNOLDS TOBACCO INTERNATIONAL,
INC., (Delaware), USA.
NORTHERN BRANDS INTERNATIONAL, INC.,
These companies were all either
affiliated companies or subsidiaries of R.J. R. Nabisco
Holdings, Corp., (Delaware), USA during the time of the alleged
offences. A series of mergers and restructuring resulted in the
creation of a holding company now known as R.J. Reynolds Tobacco
Holdings, Inc., (Delaware), USA.
Also charged are current and former
employees of these companies. They are:
EDWARD LANG of Naples, Florida - former
member of the Board Of Directors of RJR-Macdonald, Inc. and
former Senior Vice President of Manufacturing for R.J. Reynolds
DALE SISEL of Gillette, Wyoming - former
President and Chief Executive Officer for R.J. Reynolds Tobacco
JAAP UITTENBOGAARD of Jupiter, Florida -
former Chief Financial Officer and Vice President of Finance for
R.J. Reynolds Tobacco International, Inc. and former Director of
Northern Brands International, Inc.
PIERRE BRUNELLE of Geneva, Switzerland
and the Province of Quebec - former President and Chief
Executive Officer of RJR-Macdonald, Inc. and former member of
the Board of Directors of RJR- Macdonald, Inc.
PAUL NEUMANN of Geneva, Switzerland -
former Vice President of Finance for RJR-Macdonald, Inc. and
current employee of Japan Tobacco International, Geneva.
ROLAND KOSTANTOS of Geneva, Switzerland -
former Chief Financial Officer for R.J. Reynolds Tobacco
International, Inc. and former Vice President of Finance, Chief
Financial Officer, and Vice President of Finance and
Administration for RJR- Macdonald, Inc. Mr. Kostantos is a
current employee of Japan Tobacco International, Geneva.
STANLEY SMITH of British Columbia -
former Vice President of Sales for Canada for RJR-Macdonald,
And PETER MacGREGOR of Atlanta, Georgia -
former Manager of Finance and Administration for Northern
Brands International, Inc.
Also identified in this indictment as an
unindicted co- conspirator is LARRY MILLER of Las Vegas, Nevada
and Messena, New York. Mr. Miller is currently serving seventeen
and one-half years in the United States federal corrections system
for smuggling- related offences and for conspiring to conduct
financial transactions that defrauded the United States and Canada
of tax revenue.
All accused have been summoned to appear in
court at Old City Hall in Toronto, Courtroom 111 on Wednesday,
March 26th, 2003.
The RCMP alleges that, between 1991 and
1996, the accused conspired together to commit fraud by agreeing
to deal in Canadian blend cigarettes and fine-cut tobacco in a
manner which fraudulently deprived the governments of Canada,
Ontario and Quebec of more than $1.2 billion dollars in lost
revenue through evaded federal excise duties and taxes and
provincial tobacco taxes.
The RCMP also alleges that the revenue of
RJR- Macdonald Inc. derived from the sale of Canadian blend
tobacco products into the United States between 1991 and 1996 was
a result of this fraudulent activity, and as such, this revenue is
proceeds of crime.
The RCMP alleges that, between 1991 and
1996, the accused supplied the Canadian black market with Canadian
blend tobacco products manufactured both in Canada and Puerto
Rico, knowing that these products were being smuggled back into
Canada and onto the commercial market. In addition, the RCMP
alleges that the accused furthered this criminal activity by
knowingly facilitating the flow of Canadian blend tobacco products
to Canada through an affiliated company in the United States and
third parties in the Caribbean in order to ensure a constant
supply of the contraband to smuggling channels.
"As Canadian taxpayers, we all pay for
corporate fraud," said Inspector Robert Davis, Officer in Charge
of the RCMP Greater Toronto District Commercial Crime Section. "We
pay in revenue losses that contribute towards our social welfare
programs - programs that support our seniors, educate our children
and take care of our ill and less fortunate."
"To give you some idea of the impact, the
more than $l.2 billion dollars in lost revenue identified during
this investigation is enough money to buy two MRI machines for
each and every public hospital in Ontario and Quebec. $1.2 billion
dollars is also enough money to supply every high school student
in Ontario and Quebec with new text books for one year."
"This investigation is part of the RCMP's
on-going efforts to investigate allegations of impropriety by
corporations operating in Canada," added Inspector Davis. "Large
multi-national corporations will be held accountable for their
criminal activity. Senior executives of those companies will not
be allowed to hide behind a 'corporate veil' to protect themselves
from criminal prosecution."
This investigation is on-going and the
possibility exists that further charges will be laid.
Media Relations Officer "O" Division
(Toronto), (905) 876-9674 (office), (416) 565-8012 (cell)/ ST:
RCMP raid Imperial Tobacco:; [Final
DEBBIE PARKES. The Gazette. Montreal, Que.: Nov 27, 2004. pg.
Searching for documents related to
cigarette smuggling in the '90s
Mounties armed with a search warrant
swooped down yesterday on the Montreal head offices of Imperial
Tobacco, Canada's No. 1 cigarette manufacturer.
They spent the day searching for documents
related to cigarette smuggling in the 1990s, and that's how
they'll spend this weekend, too.
The search warrant expires at 8 a.m.
The operation - reminiscent of a similar
search carried out against Rothmans Inc. in 2002 - prompted
Imperial Tobacco to rush to its own defence.
"We were surprised there are any suspicions
about Imperial Tobacco, because as early as 1989 we raised the
issue (of smuggling) with the RCMP and said this is a problem,
they should be doing something," Imperial Tobacco spokesperson
Christina Dona said.
She said the company even lent the RCMP a
truck for a sting operation, although she was unable to provide
dates or details.
"If anything, we think they'll find
evidence of collusion with the RCMP," Dona said, tongue-in-cheek.
She said the company is co-operating fully,
and senior managers accompanied police throughout the day to help
them find whatever paper and electronically stored documents they
Dona estimated that between 10 and 20
officers were at the company's offices over the course of the day.
She said she did not know what or how many documents were seized.
The RCMP wasn't commenting, other than to
confirm that a search was in process. The warrant allows police to
take information relating mainly to 1989-1996, Dona said.
During that period, cigarette smuggling
reached all-time highs.
The smuggling was sparked by government
efforts to discourage smoking by significantly increasing tobacco
Cigarettes shipped to the United States
were smuggled back into Canada, principally through the Akwesasne
Mohawk reserve at Cornwall, which straddles the Canada-U.S.
The 1989-1996 period in yesterday's search
warrant is the same period covered by the RCMP's search of
Rothmans's Toronto offices in January 2002.
Imperial is the last of Canada's three Big
Tobacco companies targeted by federal officials.
In February 2003, the RCMP laid criminal
fraud charges against JTI-Macdonald (formerly RJR-Macdonald), the
country's No. 3 tobacco company.
In August, Quebec assessed the company for
$1.36 billion in unpaid taxes linked to cigarette smuggling,
leading the company to seek bankruptcy protection.
Last year, Ottawa filed a $1.5-billion suit
against the company.
Also, in December 1999, Les Thompson, a
former RJR-Macdonald sales executive, was sentenced by a U.S.
judge to 70 months in prison after pleading guilty to laundering
$72 million U.S. from smuggling tobacco into Canada.
That same month, The Gazette ran an
investigative report detailing how each of Canada's big three
tobacco companies organized its own corporate structure or signed
contracts to service the black market.
Yesterday, Dona insisted Imperial Tobacco
has done nothing wrong.
"We're proud of our ethical behaviour. We
feel we have nothing to be ashamed of."
RCMP continue to weed out documents at
tobacco firm; [Final Edition]
The Gazette. Montreal, Que.: Nov 28, 2004. pg. A.3
The RCMP search at Imperial Tobacco's
Montreal head office continued yesterday, said company
spokesperson Yves-Thomas Dorval.
"They're doing their job and that's it," he
The company won't comment on what documents
have been hauled away since police arrived at 9:30 a.m. Friday
with a search warrant that expires at 8 a.m. tomorrow.
The search, for hard copy and
electronically stored documents covering the period from 1989 to
1994, is supposedly part of an investigation related to tobacco
smuggling that was rampant during that period.
Imperial, Canada's No. 1 cigarette
manufacturer, is the last of the country's three big tobacco
companies to be targeted by federal officials.
In February 2003, the RCMP sought criminal
charges against JTI- Macdonald, and both the federal and Quebec
governments have filed suits against the company for a total of
In January 2002, the RCMP searched the
Toronto, Brampton, Ont., and Quebec City offices of Rothmans Inc.,
seeking records of the company's exports to the United States
between 1989 and 1996.
Meanwhile Imperial's spokesperson Dorval
said yesterday the company has never been involved in organizing
its own corporate structure or signing special contracts to
service the black- market economy, contrary to what was alleged in
a Gazette investigative article published in 1999.
RCMP warrant used in raid alleges
Imperial Tobacco smuggled cigarettes
Canadian Press NewsWire. Toronto: Dec 15, 2004.
MONTREAL (CP) - A warrant used by the RCMP
to raid Imperial Tobacco offices alleges the company conspired to
boost its market share with its own smuggled cigarettes while
withholding more than $600 million in taxes from the federal
The alleged conspiracy included a plan that
the Canadian cigarettes smuggled back in from the United States be
reintroduced to Canadian customers through clandestine contraband
By participating in the contraband network,
Imperial Tobacco Ltd. "avoided the negative effect of the increase
in taxes on their sales," the warrant said.
In doing so, the company was able to expand
its market share by bringing in a cheaper product that became more
popular with customers, according to an affidavit filed at the
The RCMP searched Imperial Tobacco's
Montreal office in November as part of an investigation that began
in 1998. No charges have been laid.
The Mounties were seeking documents related
to the sale, production, export and import of cigarettes, in
particular popular brands like Player's and du Maurier.
In the affidavit, RCMP investigator Marc
Roussy alleges that Imperial Tobacco conspired with several other
firms - including Imperial's parent company, British American
Tobacco - and individuals to sell billions of cigarettes to U.S.
distributors so they could be smuggled back into Canada through
the Akwesasne reserve, which straddles the Quebec, Ontario and
The court document includes a graph
indicating Imperial Tobacco increased its market share from 59.5
per cent in 1993, a year when the alleged smuggling peaked, to
68.4 per cent by 1998.
The affidavit alleges that by participating
in this smuggling network, Imperial Tobacco and other
"co-conspirators" defrauded Ottawa of $607 million in taxes.
That is based on an estimate that the
company sold 50 million cartons of cigarettes between 1991 and
1993 through the contraband network. The tax on a carton of
cigarettes at the time was $12.14.
Imperial spokesperson Yves-Thomas Dorval
said the company is disappointed the court document "does not list
all of the co-operation we have given the RCMP."
"We fully co-operated with them (when they
executed the warrant).
"We don't have anything new to say about
(the investigation), but we continue to co-operate," Dorval said.
"It's something we've heard for years. Allegations are
allegations, not facts proven before a court."
Ex-tobacco exec avoids jail time; [Final
The Gazette. Montreal, Que.: May 5, 2006. pg. B.5
A former tobacco company executive has
reportedly been sentenced to eight months of house arrest for his
role in a conspiracy to to smuggle cigarettes. CBC News said Stan
Smith's conditional sentence follows his earlier guilty plea.
Smith was vice-president of sales for the former RJR-MacDonald
company in the early 1990s when high tobacco taxes prompted a
surge in cigarette smuggling. Investigators have accused JTI-MacDonald
Corp., formerly known as RJR-MacDonald, Inc., and several of its
subsidiaries of conspiring to defraud the federal, Quebec and
Ontario governments out of $1.2 billion in tax revenue between
1991 and 1996.
Tobacco firm, executive face fraud
charges; Smuggling scheme allegations. Head of Non-Smokers
Association Quebec wing calls court decision 'a positive step';
WILLIAM MARSDEN. The Gazette. Montreal, Que.: May 31, 2007. pg.
A major tobacco company and its former top
executive have been ordered to stand trial on allegations they
organized a massive tobacco smuggling scheme that defrauded the
governments of Canada, Ontario and Quebec of more than $1 billion.
In what will be an unprecedented fraud
trial, an Ontario Court judge yesterday ordered JTI-Macdonald
Corp. and its former president Edward Lang to stand trial on
charges that they exported billions of tax-free Canadian
cigarettes into the United States so they could be smuggled back
into Canada through the Akwesasne Mohawk reserve near Cornwall and
sold on the black market.
They are also charged with establishing
tobacco plants in Puerto Rico that manufactured Canadian brand
cigarettes such as Export A, which were then sold them to
smugglers who smuggled them into Canada.
If found guilty, JTI-Macdonald could face
extensive forfeiture to the Crown equivalent to the amount of the
But trying to get money out of the tobacco
firm could be like getting water out of a stone. The company filed
for bankruptcy protection in 2004 after Quebec assessed it for
$1.36 billion in unpaid tobacco taxes dating back to the early
After the bankruptcy protection filing,
Ottawa levelled a civil claim against JTI-Macdonald for $4.3
billion claiming it lost that amount in taxes as a result of JTI's
alleged participation in tobacco smuggling.
Lang, who is retired and lives in Florida,
could face up to 14 years in prison plus fines.
"We remain confident that a full and fair
hearing of the evidence at trial will confirm these allegations to
be false," JTI-Macdonald spokesperson Guy Cote said in a written
statement. He added that JTI will pay Lang's legal bills. "JTI-Macdonald
does not, and never did, condone smuggling or illegal activity."
Francois Damphousse, head of the Quebec
wing of the Non-Smokers Association, called the court decision "a
positive step forward in trying to get justice on this issue even
though it has taken a long time."
He added that the decision to send a
corporation and its former top executive to trial "sends a message
to all executives that they can't hide inside a corporate bubble
and think they can't be touched."
The trial committal comes three years after
the RCMP laid six fraud charges and one conspiracy charge against
JTI-Macdonald, formerly known as RJR Macdonald, plus eight
executives of RJR, its U.S.-based parent company R.J. Reynolds Co.
as well as its international affiliate R.J. Reynolds International
Lang was the only executive sent to trial.
Stan Smith, a former RJR vice-president,
pleaded guilty in Ontario last year and was sentenced to eight
months of house arrest. He had been cooperating with police since
Judge David A. Fairgrieve ruled there was
insufficient evidence to send six other defendants to trial. They
include Dale Sisel of Wyoming, Jaap Uittenbogaard of Florida,
Pierre Brunelle, Paul Neumann and Roland Kostantos, all of
Switzerland, and Peter MacGregor, of Atlanta, Ga.
Yesterday's Ontario Court judgment follows
a preliminary hearing that lasted about nine months in Toronto in
2005-06. Judge Fairgrieve imposed a publication ban on the details
of his 27-page judgment.
The charges date back to the early 1990s
when federal and provincial governments raised tobacco taxes to
The RCMP began investigating RJR Macdonald
in 1999 following stories in The Gazette that revealed the
involvement of all three major tobacco companies including
Imperial Tobacco and Rothmans Bensen and Hedges in supplying
smugglers with their tobacco products.
The government has never sued or attempted
to prosecute Imperial Tobacco or Rothmans.
A major government witness is former RJR
Macdonald sales executive Les Thompson who pleaded guilty in 2000
in federal court in New York State to smuggling-related charges
and was sentenced to six years in jail.
Now both Thompson and Smith are expected to
testify against JTI- Macdonald and Lang.
Thompson, who is out of prison, admitted
that he managed the company's alleged smuggling activities through
a spinoff company called Northern Brands International, a Delaware
corporation based in Winston-Salem, N.C.
Northern Brands pleaded guilty in the U.S.
in 1999 to a minor customs infraction and paid $15 million U.S. in
fines and forfeiture. As part of the agreement, the U.S. Justice
Department Northern District pledged not to take any further
action against RJR Nabisco, the New York parent company.
The smuggling of popular Canadian-brand
cigarettes was so enormous in the early 1990s that surveys
indicated about one in three cigarettes sold in Canada was
Smuggling made some Indians
multi-millionaires while at the same time increase violent crime
on reserves as smugglers battled for market share.
Black market cigarettes became so cheap
that teenage smoking increased to 38 per cent from 19 per cent,
Faced with such a huge illegal market as
well as increased violent crime on the reserves and heavy lobbying
by the tobacco companies, governments substantially reduced in
1994 their tobacco taxes. This cost governments billions in lost
Tobacco taxes began to rise again in 2001
and are now at record levels.
To stop Canadian companies from exporting
their products abroad so they can be smuggled back into Canada,
the federal government imposed hefty export taxes.
Still, the higher taxes have recently
resulted in another increase in black market cigarettes on local
Unable to buy cheap Canadian brands, some
Mohawks are manufacturing their own tax-free cigarettes and
selling them out of smoke shops that are proliferating in
It is a problem governments have been
unable to solve.
JUDGE THROWS OUT SMUGGLING CHARGES AGAINST
SEVEN AT JTI; [National Edition]
Peter Brieger. National Post. Don Mills, Ont.: May 31, 2007. pg.
An Ontario judge yesterday threw out smuggling charges against
seven of eight senior cigarette company executives, four years
after the Mounties made the high-profile allegations.
An Ontario judge yesterday threw out
smuggling charges against seven of eight senior cigarette company
executives, four years after the Mounties made the high-profile
allegations. However, JTI- Macdonald Corp. and its former
vice-president of manufacturing, Ed Lang, must still stand trial
on allegations they orchestrated a scheme to avoid paying
$12-billion worth of taxes by smuggling contraband tobacco from
the United States into Canada, ruled Mr. Justice David Fairgrieves
of the Ontario Superior Court of Justice. The judge made his
ruling after a preliminary hearing, which is subject to a
publication ban, outlining the evidence against the defendants. A
trial date has not been set. The charges, laid in 2003, came after
a four-year police probe into the alleged smuggling between 1991
and 1996. The executives were accused of supplying the domestic
black market with tobacco products they knew had been smuggled
back into Canada and onto the commercial market. The charges also
alleged the defendants used a U.S. affiliate to keep up the flow
of illegal cigarettes.