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Tobacco Company Had Natives Smuggle [07/14-7]

Excerpts from: Tobacco company had natives smuggle, group alleges

By VICTOR MALAREK Globe and Mail [7/12/03]

Antismoking activists say they cannot understand why the federal government isn't pursuing tobacco companies in Canada for up to $5-billion in taxes lost to cigarette smuggling during the early 1990s.

A recently formed coalition against tax evasion, spearheaded by the Non-Smokers' Rights Association, wants to know why federal Justice Minister Martin Cauchon is reluctant to file a lawsuit to recover the lost revenue.

Garfield Mahood, executive director of the association, said there is ample evidence that the tobacco industry was heavily involved in the smuggling trade.

And Neal Mednick, a spokesman for cigarette manufacturer JTI-Macdonald Corp., said the company is willing to talk to the government about an out-of-court settlement, "as long as they are reasonable about this. But we are also prepared to fight this all the way in court."

A coalition of 27 health organizations, health professionals and churches wrote to Mr. Cauchon in January demanding that the tobacco industry be held accountable for its role in the 1990s black-market enterprise, Mr. Mahood said.

"This activity may have been the largest and most destructive corporate misconduct in the history of Canadian business or public health," the letter states. "That this industry would be allowed to escape responsibility for its actions should be unthinkable for any minister of justice."

The letter says the activity "led to two massive impacts on Canada.

"First, governments were defrauded of at least $5-billion in tobacco tax revenues. Second, the increase in smoking, beyond what would otherwise have existed, due to the availability of contraband and the 'deep discount' cigarettes . . . will lead inevitably to substantial increases in tobacco-caused illnesses and death."

Three months later, Mr. Cauchon responded with a letter stating that he and his officials "will take the issues you have raised into consideration."

Yesterday, Mr. Cauchon refused a request for an interview. Mike Murphy, his press aide, said "at this stage the matter is still under review. It is a complex issue and has to be looked at in that light."

David Sweanor, legal council for the association, said the fact that a lawsuit has not been filed "raises real questions as to why not, because all of the documents from the industry, and indeed industry insiders themselves, are basically saying '. . . when are you going to come and get the money?'

"It floors me that they'd be thinking about whether to file or they'd be delaying filing. The likelihood of [the federal government] being able to win a case looks awfully good, and of course, the brazenness of what the corporations were doing raises really tough questions about why wouldn't you go after them.

"If you let corporations get away with that sort of corporate behaviour, what are you saying about the future running of our justice system?"

Mr. Mahood suggested that the stumbling block may not be legal. "It's very, very political and I have to wonder where in the hell is that coming from. . . . Are there skeletons in the closet that some people don't want to tumble out?"

Mr. Sweanor said he met with Mr. Cauchon's executive assistant and a department official to discuss the matter in June. He described the meeting as "a bit of a roller coaster."

He said the senior people he met in the Justice Department did not know much about the case.

"They don't even have a briefing note," he said. "But they say they're very interested in it and could we please bring them up to speed. This is how the roller coaster goes. . . . How could they not know about the issue when we specifically asked for a meeting on it and they agreed to see us and then as we give some the background they seem blown away and they say this is really something and we should do something about this."

Mr. Sweanor said a meeting set up for the next week was cancelled and not rescheduled.

In December, 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.

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 a network of smugglers who used native reserves straddling the U.S.-Canada border to channel the cigarettes into the black market in Canada.