RJR: Canada Sues Tobacco Giant
The Canadian government filed a lawsuit against R.J. Reynolds Tobacco Holdings Inc. and affiliated companies yesterday for $1 billion, claiming the company smuggled cigarettes into the country in an attempt to avoid Canada's high taxes. Filed in a federal court in Syracuse, NY, under the U.S. Racketeer Influenced and Corrupt Organizations (RICO) Act, the suit alleges that RJR shipped cigarettes produced in Canada or Puerto Rico to the United States and then -- through a "complicated and interconnected scheme" -- back into Canada to be sold on the black market. Many of the cigarettes were funneled through an Indian reservation that straddles the U.S./Canadian border. Officials say the scheme was successful. In 1994, 40% of Canada's cigarette sales were illegal. During this time, the Canadian market share for RJR rose from 12% to 20%. A former executive with RJR subsidiary Northern Brands Inc., and more than 20 others have pleaded guilty to smuggling charges. RJR officials had no comment, saying they had not yet reviewed the suit. Although a few countries have sued U.S. cigarette manufacturers to recover lost health costs, the Canadian suit is the first attempt to hold the industry liable for revenue lost from untaxed cigarettes. Experts said this litigation "opens a potentially damaging new line of attack against tobacco companies and could spur a wave of similar lawsuits around the world" (Segal, Washington Post, 12/22).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.