Press Release

September 10, 2008

Government makes a bad deal with tobacco companies
Doctors ask Canada's Auditor General to investigate

(Ottawa) – Physicians for a Smoke-Free Canada (PSC) is asking the Auditor General of Canada to investigate the recent rotten deal between governments and two tobacco companies.

“The July 31 cosy deal with tobacco companies offered them a get-out-jail free card for pennies on the dollar,” said PSC’s president, Dr. Atul Kapur.  

PSC has asked for a review of the appropriateness of the  government’s actions in light of the thousands of people who started smoking because unchecked smuggling led to cheaper cigarettes and the government’s failure to factor the harm done to these victims of industry actions into the settlements reached with the companies responsible. 

 This past weekend a former tobacco industry official, Paul  Finlayson, told the Montreal Gazette that the settlement reached for only one billion dollars was ‘chump change’ and that the government “did not have the guts of a field mouse” to go after the companies involved. (see Montreal Gazette article below)

Dr. Kapur has made public the letter to Auditor General,  Sheila Fraser. “We have asked her to exercise her authority to get to the bottom of this mess. Company executives got off scot-free and companies got only a slap on the wrist; the people of Canada have received only "chump change" in compensation and there has been no suitable punishment for fiscal  fraud on a massive scale; no-one has gone to jail for this multi-billion dollar fraud; and the disastrous public health consequences have gone unaddressed,” he concluded.

  • Neil Collishaw  (613) 233 4878


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 smugglers.

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 2004.

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 black market.

"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.