European Union takes US tobacco companies to court over smuggling

TheEU has filed a RICO action (Racketeer Influenced Corrupt Organisations) againstPhilip Morris and RJ Reynolds in the US courts - see European Commission pressrelease. The civil RICO action will attempt torecover excise duties, which the EU will allege were lost as a result of theinvolvement in smuggling of the two companies. If proven, the case could cost the companies billions - civil RICOallows punitive damages of three times the actual loss and losses over fouryears to be assessed. There are nowcases arising from Canada, Colombia, Ecuador and EU.

CliveBates, Director of Action on Smoking and Health (ASH) in London said:

"The evidence suggests tobacco companies haveplayed a controlling and orchestrating role in the global tobacco smugglingracket, and it is important that the authorities use whatever legal routes thatare available to stop them in their tracks. Now they are beginning to see the tobacco industry as underlyingcommercial drivers of cigarette smuggling, we are one step closer to definingresponses that will work.

"Why try to tackle thousands of small traders andpetty criminals when there are legal actions available against the tobaccocompanies, which are the prime movers and the real Mr. Bigs in tobaccosmuggling."

Theaction does not yet include British American Tobacco. However, it would be a mistake to assume that BAT is off thehook. The EU action is using the sameNew York law firm (Speiser, Krause, Nolan and Granito) as the US-based racketeering action over Colombian cigarettesmuggling. In this case, BAT was added severalmonths after the initial case was launched against Philip Morris. Thiscould easily happen again. On Monday 30^th October the UK Department of Trade andIndustry launched an investigation into BAT's involvement insmuggling.

"The DTI should make its report on BAT availableto the EU anti-fraud unit with a view to assisting with the RICO case andassessing whether BAT should be joined to the action.

"This will give a real boost to the internationalefforts to tackle smuggling through the World Health Organisation tobaccotreaty and its smuggling protocol. Ifgovernments understand the role of the tobacco industry and work together torestrain it, they can tackle the problem without rolling back their policies ontaxing tobacco.

Some350 billion sticks are smuggled annually - about one third of allinternationally traded cigarettes. Formore information see: BAT & smuggling;ASH international resources.

WHO Framework Conventionon Tobacco Control smuggling protocol. Governments are negotiating atreaty on tobacco control. In Geneva16-21October 2000 over 90 countries expressed their support for toughinter-governmental action against smuggling to be built into the convention.See FCTC official paper A/FCTC/INB1/2 [PDF] and ASH briefing on FCTC andsmuggling. For further information, seea recent BMJ paper How cigarette smuggling can be reduced.

Contacts:

CliveBates (ASH): +44 (0)20 7739 5902 (office) +44 (0)468 791237 (mobile)