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• Former RJR executive to testify on smuggling 

A former executive at RJR-Macdonald Corp. has agreed to plead guilty to a criminal charge and testify against tobacco firms over allegations they profited from cigarette smuggling. Stanley Smith, a former vice-president of sales at RJR-MacDonald, will testify at a preliminary hearing in Toronto to determine if the Crown has enough evidence to take its case against Japan Tobacco Inc.'s JTI-MacDonald unit and other firms to trial, Mr. Smith's attorney Brian Heller told an Ontario court judge. "If Smith pleads guilty and is sentenced then it is the Crown's inte

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Former RJR executive to testify on smuggling 

A former executive at RJR-Macdonald Corp. has agreed to plead guilty to a criminal charge and testify against tobacco firms over allegations they profited from cigarette smuggling. Stanley Smith, a former vice-president of sales at RJR-MacDonald, will testify at a preliminary hearing in Toronto to determine if the Crown has enough evidence to take its case against Japan Tobacco Inc.'s JTI-MacDonald unit and other firms to trial, Mr. Smith's attorney Brian Heller told an Ontario court judge. . . .

JTI-MacDonald, a successor to RJR-Macdonald, and three companies that were associated with or were units of RJR Nabisco Holdings Corp. are accused of defrauding Ottawa of more than $1.2-billion in taxes and duties by exporting cigarettes to the United States, knowing they would be smuggled back into Canada for sale on the black market.

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Suit against RJR dismissed 

A U.S. District Court judge in Georgia has dismissed a class-action lawsuit filed on behalf of cigarette wholesalers against R.J. Reynolds Tobacco Co. and other cigarette-makers.

The suit claimed RJR and others conspired to fix the wholesale price of cigarettes.

"As the judge determined, these cases had no merit," stated Darryl Marsch, senior counsel for Reynolds Tobacco. "Reynolds Tobacco makes unilateral pricing decisions based on its independent business judgment."

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State challenges tobacco ads in youth-oriented magazines 

SAN DIEGO (AP) -- A California judge has been asked to decide whether the nation's No. 2 tobacco firm violated a landmark 1998 settlement with 46 states by advertising in magazines popular with teen-agers.

The state Attorney General's office, which filed suit against R.J. Reynolds last year, has asked Superior Court Judge Ronald Prager to fine the Winston-Salem, N.C.-based company $25 million and ban it from advertising in 50 magazines read by teens.

Prager was expected to issue a ruling Thursday.

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Employee is suing RJR over its retirement plan 

An employee of R.J. Reynolds Tobacco Co. in Winston-Salem has filed a lawsuit against the company, alleging that it failed to live up to its duty as trustee of its 401(k) retirement plan by selling Nabisco stocks at a loss in January 2000.

The lawsuit filed by Richard G. Tatum of Winston-Salem in federal court in Greensboro last week asks for unspecified damages and class status on behalf of more than 1,000 employees. Tatum declined to comment on the case yesterday.

RJR Tobacco and its parent company, R.J. Reynolds Tobacco Holdings Inc., "believe this lawsuit is without merit and intend to defend it vigorously," RJR said. The company said it has not yet been served with the suit.

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State challenges tobacco ads in youth-oriented magazines 

SAN DIEGO (AP) - R.J. Reynolds Tobacco Co. should be fined $20 million and barred from advertising in 50 magazines to prevent it from targeting teen-agers, attorneys for the state said Monday.

"They have advertised in magazines very popular with teen-agers such as Motorcyclist, Hot Rod, and Spin," Karen Leaf of the California Attorney General's Office said during arguments closing the monthlong trial.

The state accuses Reynolds, the nation's No. 2 tobacco firm, of marketing to teens in violation of the 1998 settlement that major tobacco companies reached with 46 states. The settlement makes no specific mention of magazine advertising but includes a ban on the companies taking "any action, directly or indirectly, to target youth."

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Reynolds employee alleges mishandling of pension funds 

An employee of R.J. Reynolds Tobacco Co. argues in a federal lawsuit that he and as many as 3,000 other 401(k) plan participants lost money when the company "froze" certain stocks during the 1999 spinoff from Nabisco.

Forsyth County resident Richard Tatum alleges in a proposed class-action suit filed May 13 that Reynolds violated the Employment Retirement Income Security Act because it failed to act in the interest of investment plan participants.

The lawsuit, filed in U.S. Middle District Court in Greensboro, says that between June 14, 1999, and Jan. 31, 2000, fiduciaries of the Reynolds investment plan didn't allow participants to direct more funds into Nabisco stocks that were part of the plan. (They could, however, sell the Nabisco stocks, Tatum's attorney said.)

On Jan. 31, 2000, the plan sold off all its remaining Nabisco stocks, as it announced it would do just before the June 15 spinoff.

Nabisco stocks steadily fell during the fall of 1999 and early 2001. Tatum alleges that it would have been more prudent had he and other plan participants been allowed to buy more Nabisco stocks while waiting for recovery, and also not to sell the stocks when they reached low points, as they did in January 2000.

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IN BRIEF / TOBACCO: Court Seeks U.S. View of Smuggling Case 

The Supreme Court asked the U.S. government for its view on a ruling that dismissed Canada's civil racketeering lawsuit accusing R.J. Reynolds Tobacco Holdings Inc. and its affiliates of smuggling billions of cigarettes to avoid paying taxes.

A U.S. appeals court upheld the dismissal of the lawsuit, which alleged the defendants tried to defraud Canada of tax revenue in the early 1990s with a scheme that shipped Canadian cigarette brands to the United States and then smuggled them back to Canada.

The appellate decision declared that Canada's case represented an impermissible effort to use U.S. courts to collect foreign taxes.

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Appeals court upholds recycling tax break for RJR  

The state's environmental agency was wrong to deny a recycling tax break to R.J. Reynolds Tobacco Co. for its use of tobacco stems, scrap and dust, the state Court of Appeals ruled Tuesday.

Beginning in 1982, Reynolds received a tax certification for recycling equipment at its Whitaker Park cigarette plant in Forsyth County. The state Department of Environment and Natural Resources denied the company's request for certification of new equipment on April 16, 1998.

The agency said "the materials processed by the equipment were not waste materials," according to the court's opinion.

Under the tax program, companies receive real estate, personal property and corporate tax breaks for spending money to buy equipment for resource recovery or recycling.

Reynolds appealed the decision and an administrative law judge sided with DENR; Reynolds appealed to a Superior Court judge, who ruled in favor of the company. The state agency appealed to the Court of Appeals.

The court said the tobacco company sends 5 million to 7 million pounds of tobacco stem waste to landfills each year and uses about 70 million pounds of scraps a year as filler in cigarettes.

"One of Reynolds' witnesses testified that even if there were no tax incentives for recycling and resource recovery of or from solid waste, Reynolds would still operate the process because of its cost-effectiveness," the court said.

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• Federal Appeals Court Upholds Dismissal Of Smuggling Suit Against R.J. Reynolds  

A federal appeals court upheld the dismissal of a Canadian cigarette-smuggling lawsuit against R.J. Reynolds Tobacco Holdings Inc., saying that Canada's case was an impermissible effort to use U.S. courts to collect foreign taxes.

In a 2-1 decision, a panel of the U.S. Court of Appeals for the Second Circuit, sitting in New York, ruled Friday that the so-called common law revenue rule bars Canada and other governments from using American courts to enforce foreign tax laws.

"No court wishes to find itself in the position of being unable to right an alleged wrong," wrote Judge Robert A. Katzmann in the majority opinion. "Nonetheless, we are without license to abandon unilaterally the centuries-old, albeit sharply attacked, revenue rule." . .

In a strongly worded dissent to the majority opinion, appeals-court Judge Guido Calabresi wrote that "the revenue rule has nothing to do with this case." He continued: "The suit before us in no way requires our courts to enforce foreign judgments or claims; it simply is an action for damages provided for and brought under federal law."

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• R.J. Reynolds Tobacco Company Calls Federal Court Ruling in Canadian Smuggling Suit 'Important Victory for International Law' 

In a ruling that has implications for several other lawsuits brought by foreign governments against the tobacco industry, a U.S. federal appellate court today agreed that a suit brought by the Canadian government seeking to recover tax revenues allegedly lost because of cigarette smuggling should be dismissed.

``Today's decision is an important victory for international law because, after a thorough analysis of the Revenue Rule, the court affirmed that foreign governments cannot use our country's judicial system to enforce their revenue laws,'' said Daniel W. Donahue, senior vice president and deputy general counsel for R.J. Reynolds Tobacco Company.

Donahue said that today's ruling has implications for other cases, including those filed by Belize, Honduras, Ecuador, and the European Community and 10 of its member states.

Today's two-to-one ruling by the U.S. Second Circuit Court of Appeals affirmed a June 2000 decision by the U.S. District Court for the Northern District of New York to dismiss the Canadian suit.

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• RJ Reynolds Tobacco, Affils Served With 47 Lawsuits In 2Q 

R.J. Reynolds Tobacco Co., a wholly owned subsidiary of R.J. Reynolds Tobacco Holdings Inc. (RJR), and its affiliates were served with 47 lawsuits in the second quarter ended June 30, with 29 actions either dismissed or resolved without trial.

According to the company's quarterly report filed Wednesday with the Securities and Exchange Commission, R.J. Reynolds Tobacco has 1,677 active U.S. cases pending as of June 30, including about 1,200 cases pending in West Virginia state court as a consolidated action, compared with 535 on June 30, 2000.

The various legal actions mainly claim that the use or exposure to RJR Tobacco's products have caused addiction, lung cancer and other diseases, the filing said.

Of the 1,677 active U.S. cases, 146 are pending in federal court, 1,527 in state court and four in tribal court, the filing said.

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Star Scientific Sues RJ Reynolds 

Cigarette maker Star Scientific Inc. said it filed a federal lawsuit on Wednesday against R.J. Reynolds Tobacco Co., charging that Reynolds infringed a Star Scientific patent covering a process to reduce a cancer-causing agent in tobacco.

The patent at issue, Star Scientific said, involves the curing of tobacco in a controlled environment to substantially reduce the formation of at least one nitrosamine, a cancer-causing agent in tobacco and tobacco smoke. . .

A spokesman for Reynolds said the company will vigorously defend against the lawsuit.

``We have not infringed any valid patents by Star,'' spokesman Seth Moskowitz said. R.J. Reynolds Tobacco is a unit of R.J. Reynolds Tobacco Holdings Inc.

Star said in a statement it believes that successful prosecution of the lawsuit, as well as the tobacco industry's broad adoption of this technology, could yield royalties in the billions of dollars over the life of the patent.

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• R.J Reynolds To Limit Mailings 

The R.J. Reynolds Tobacco Co. has agreed to mail free cigarettes only to adults who sign up to receive cigarettes for evaluation or testing purposes, Attorney General Bill Lockyer announced Friday.

The agreement settles a complaint that the company mailed cigarettes to homes where children might have access to the mail.

The settlement also limits how many cigarette packs can be sent and mandates that the company report to the state how many cigarettes it mails. . .

The settlement was approved in San Diego Superior Court last week. California and Arizona will share a $175,000 payment that covers investigation costs. Arizona announced a similar agreement last week.

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California AG Sues R.J. Reynolds Over Mailed Samples 

The action accuses R.J. Reynolds of mailing an estimated 900,000 packs of free cigarettes in multiple-pack mailings to the homes of 115,000 Californians "under the guise of consumer testing or evaluation in order to market its products" and claims the survey questionnaire is "unlikely to yield data or information useful for legitimate consumer testing.". .

The action alleges that the company's distribution program violates the settlement terms by, among other things, mailing samples to individuals who had not certified their names or the fact that they are over the age of 18; distributing free packs of cigarettes to people who had not agreed to receive them at their home; and failing to employ procedures that reasonably ensure that the product will actually reach the intended recipient.

In general, Lockyer said the testing was "phony ... and just an excuse to mail a lot of samples." . .

A hearing on this action is set for July 10 before Judge Ronald S. Prager of San Diego Superior Court.

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