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Philip Morris Money 

In Virginia, fresh-faced, environmentally minded schoolchildren gather biological samples and test water quality in rivers and waterways, part of the Izaak Walton League's Save Our Streams initiative. In Chicago, amid Tai Chi classes and body massages, families with young children enjoy performance art and teenagers flock to an all-night "rave," all part of the Museum of Contemporary Art's Summer Solstice weekend. In Minnesota hundreds of children with HIV or AIDS come together each year at Camp Heartland, where they can "escape the isolation and misunderstanding they so often face because of this illness." And all of these kids can thank the caring people at Philip Morris.

It might raise eyebrows that children and youth engage in otherwise worthwhile activities while carrying brochures and leaflets bearing the Philip Morris logo, but these and scores of other programs--ranging from battered women's shelters to disaster relief programs to scholarships for African-American students at black colleges--are important parts of an aggressive public relations campaign by the world's largest maker of cigarettes. During 1999 Philip Morris spent more than $60 million on things like hunger relief, domestic violence programs, and support of the fine arts, including some of the nation's leading museums and dance companies. Though the company has used its tobacco profits to support charitable and educational works for decades, what's new now is that its $60-million corporate giving program is suddenly being dwarfed by a $100-million-a-year image-rebuilding campaign launched last fall, which spotlights the company's goodwill efforts. Leading the way are Philip Morris-sponsored television commercials touting the firm's good deeds, under the slogan: "Working to make a difference. The people of Philip Morris." In the ads, actors play ordinary Americans engaged in volunteer teaching and assisting victims of floods. . . .

They've lavishly funded political allies, ranging from conservative think tanks like the Cato Institute, the Heritage Foundation, the Washington Legal Foundation, and the Progress & Freedom Foundation to liberal groups like the American Civil Liberties Union. They've sponsored sports events, from airy Virginia Slims tennis tournaments to gritty NASCAR races. . . .

"They're buying silence," says Douglas. "For years, the health community, in its effort to combat tobacco, has sought the buy-in of many affected communities and has had great difficulty enlisting their support." Citing Philip Morris contributions over the years to groups like the NAACP, the Urban League, the National Organization for Women, the National Council of La Raza, and many others, Douglas says, "Many of them were either silent or provided testimony to Congress opposing tobacco-control legislation."

Further, Philip Morris's charitable giving is skewed significantly toward groups that represent parts of the population specifically targeted by cigarette marketers, especially women and minorities. . . .

In 1999, for instance, Philip Morris provided major support to the Dance Theater of Harlem and the Alvin Ailey American Dance Theater as well as to the United Negro College Fund, the American Indian College Fund, and the Thurgood Marshall Scholarship Fund. . . .

For decades the company has provided substantial support to leading institutions like New York's Whitney Museum of American Art and the Solomon R. Guggenheim Museum. . . .

Over the years, the company has funneled millions of dollars to icons of the New York cultural establishment, including the Lincoln Center--which in the 1980s handed out cigarettes in bags of favors to patrons--the Joffrey Ballet, the Brooklyn Academy of Music, the American Ballet Theater, and the Brooklyn Museum of Art, among others. . . .

That's not to say that there's no controversy over the company's donations. Case in point: Philip Morris's support for battered women's shelters, lately one of its highest-profile campaigns. Together with the National Network to End Domestic Violence, Philip Morris created a program called Doors of Hope. . . .

That worries Rita Smith, executive director of the National Coalition Against Domestic Violence, another major player in the movement. Last year the coalition's board of directors voted not to participate in Philip Morris's domestic violence program. . . .

Tom Metzger, spokesman for the National AIDS Fund, uses that argument to defend his organization's partnership with Philip Morris in a program called Positive Helpings, which provides nourishing food to people with AIDS. Citing the fact that Philip Morris's Kraft subsidiary produces foods, Metzger says, "Nothing's more benign than Jell-O. When you look at any multinational, you will find critics of something they produce." . . .

And despite the long odds, it's not impossible that Philip Morris's campaign could succeed in restoring a modicum of acceptance for the company--or at least help it survive until the industry can secure a stronger market position in Russia, China, and the developing countries.

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• Executives revealed how cigarettes got into Canada 

The investigation into Canada's three major tobacco companies for aiding and abetting smuggling in the late 1980s and early 1990s began eight years ago, after The Gazette ran a series of articles alleging the companies were the main black market suppliers.

Central to The Gazette stories were a tobacco smuggler, who has since committed suicide, and two former tobacco sales executives who oversaw a scheme to funnel billions of Canadian brand cigarettes to the black market.

Les Thompson, an RJR Macdonald sales executive, described in interviews in hotel rooms in Ontario and Quebec how RJR Macdonald (now called JTI-Macdonald) established separate offices and companies in Toronto and the United States to oversee the funnelling of its brands, like Export A, to smugglers. . . .

Another key witness is former RJR Macdonald vice-president Stan Smith, who was Thompson's boss. Smith pleaded guilty in Ontario in 2006 and was sentenced to eight months of house arrest. He had been co-operating with police since 2000. . . .

The articles also focused on the role played by Imperial Tobacco and Rothmans. Both companies sent huge shipments of Canadian brand cigarettes into the U.S. under the pretext they were supplying the duty-free market. In fact, the cigarettes were simply sold back into Canada. . . .

Smugglers told The Gazette that company sales representatives regularly showed up at the smuggling spots and warehouses near Cornwall and Buffalo, N.Y., to take inventory.

After The Gazette articles, in 1998 and 2000, Imperial and Rothmans both denied any role in the smuggling.

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• Tobacco firms cough up 

Imperial Tobacco Canada and Rothmans Inc., Canada's two largest tobacco manufacturers, have pleaded guilty to aiding and abetting the smuggling of cigarettes in the 1980s and 1990s and agreed to pay fines and penalties totalling more than $1.1 billion in an unprecedented settlement of criminal and civil cases.

The amount represents the "largest criminal fines and civil settlements in Canadian history," federal Revenue Minister Gordon O'Connor said at a news conference in Lévis yesterday. The settlement ensures the companies do not benefit financially from the smuggling, he added.

"I believe we are sending some strong and clear messages. Firstly, that such activity will not be tolerated. And secondly, that no company is above the law."

The settlements "close a significant chapter in contraband tobacco history," RCMP Assistant Commissioner Mike Cabana said. . . .

In addition to the fines, Imperial and Rothmans will each pay $50 million to establish a new government Contraband Tobacco Enforcement Strategy. The payments are due by Dec. 15.

To settle civil liability, Imperial is to pay the federal government and the provinces a percentage of its annual net sales revenue over the next 15 years, to a maximum of $350 million. Rothmans is to pay $200 million over the next 10 years, at a rate of $20 million per year. The first payment is to be made on Dec. 31, 2009. . . .

Just as the tobacco companies lied for years about the deadly health effects of smoking, Damphousse noted, they also lied originally about their involvement in smuggling.

"They have made lying a regular corporate practice," he said.

Cheap contraband cigarettes helped increased smoking rates among young people, damaging the health of thousands of Canadians, Damphousse added.

It was regrettable the RCMP did not charge any of the company executives, he said. . . .

Rothmans said the settlement opened the door to the sale of the company to Philip Morris International Inc. for $2 billion. The deal was contingent on the company settling its criminal and civil cases. . . .

If found guilty, JTI-Macdonald could face extensive forfeiture to the Crown equivalent to the amount of the fraud.

But getting money out of the tobacco firm could be difficult. The company filed for bankruptcy protection in 2004 after Quebec assessed it for $1.36 billion in unpaid taxes dating from the early 1990s.

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Tobacco giants' profits remain golden 

Despite tobacco industry claims that one-third of its market in Ontario and Quebec has been grabbed by smugglers, the cigarette companies' financial reports don't show much impact on their performance.

Healthy results reported by all three major tobacco producers indicate the contraband problem has not been as damaging as the industry is making it out to be. . . .

Most of the illegal tobacco producers are located on the U.S. side of the Akwesasne reserve.

Jerry Montour, chief executive officer of Grand River Enterprises, a federally licensed tobacco producer on the Six Nations reserve near Brantford, Ont., said the simplest way to stop the smuggling is to lay charges against companies that supply tobacco, paper, filters and machines to illegal producers.

"Why are (the suppliers) not held accountable?" he asked. "You know why they aren't? Because they are white."

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JTI-MacDonald Quick Facts 

carried on manufacturing in the Ontario Street, Montreal, building since 1876. (Photo Courtesy Industry Canada)

Company founded in 1858 in Montreal by merchants William C. and Augustine Macdonald as McDonald Brothers and Co. Tobacco Manufacturers.

Company imports tobacco from Kentucky and sells chewing and smoking "plugs."

In 1866, name changed to W. C. McDonald Tobacco Merchants and Manufacturers. They create a heart-shaped logo and launch company slogan "tobacco with a heart."

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Tobacco firm, former CEO to stand trial on fraud and conspiracy 

A judge in Toronto on Wednesday ordered a�tobacco company and a former chief executive to stand trial on charges of fraud and conspiracy.

JTI-MacDonald Corp., formerly known as RJR-MacDonald, and one-time�top executive Edward Lang are alleged to have defrauded Canadian taxpayers of more than $1 billion in taxes and duties.�

A trial date is expected to be set at the end of June.

The judge ruled that there was not enough evidence against six other former executives to commit them to trial, but said the case against�Lang and the company should proceed.

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• JTI-Macdonald faces tobacco smuggling trial  

A Canadian court ruled on Wednesday that JTI-Macdonald Corp. and a former company executive should stand trial for alleged involvement in massive cigarette smuggling scheme in the 1990s.

But the Ontario Court of Justice dismissed charges against six other executives of the cigarette maker, which was previously named RJR-Macdonald and its then-parent, R.J. Reynolds Tobacco International.

JTI-Macdonald is now a unit of Japan Tobacco Inc.

Police have accused JTI-Macdonald of scheming to sell cigarettes to U.S. suppliers from 1991 to 1996, knowing the tobacco was going to be smuggled back into Canada to avoid high taxes that were aimed at reducing smoking. . . .

The court in Toronto issued its ruling after a lengthy preliminary hearing. A standard publication ban prohibits the media from reporting details of the evidence until it is presented in the criminal trial.

In addition to the company, the court ruled there was enough evidence for Edward Lang, who was RJR-Macdonald's chief executive during the 1990s, to stand trial. . . .

Another executive, former RJR-Macdonald vice president Stanley Smith, pleaded guilty to a conspiracy charge during the preliminary hearing and is now cooperating with the prosecution as a witness.

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Tobacco exec to testify as part of plea bargain ($$) 

A senior tobacco company executive who has agreed to testify against major tobacco companies -- in a case involving the alleged smuggling of cigarettes and fraud of more than $1 billion in taxes -- is not going to jail.

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Ex-tobacco exec avoids jail time ($$) 

A former tobacco company executive has reportedly been sentenced to eight months of house arrest for his role in a conspiracy to to smuggle cigarettes. CBC News said Stan Smith's conditional sentence follows his earlier guilty plea. Smith was vice-president of sales for the former RJR-MacDonald company in the early 1990s when high tobacco taxes prompted a surge in cigarette smuggling. Investigators have accused JTI-MacDonald Corp., formerly known as RJR-MacDonald, Inc., and several of its subsidiaries of conspiring to defraud the federal, Quebec and Ontario governments out of $1.2 billion in tax revenue between 1991 and 1996.

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Ottawa appeals ruling David Dodge must testify in cigarette smuggling case 

The federal government is appealing a ruling that the Bank of Canada governor, David Dodge, must testify at the fraud trial of tobacco company JTI-Macdonald Corp.

Ottawa's appeal is slated to be heard Thursday by Justice Marc Labrosse of the Ontario Court of Appeal.

Ontario Superior Court Justice Paul Rivard ruled Dec. 7 that Dodge, who was federal deputy minister of finance from 1992 to 1997, can be called by the company.

Dodge was among 15 former and current lawyers and staff of the governments of Canada and Quebec who were subpoenaed by JTI-Macdonald. Rivard ruled that all but two of the people called must testify.

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• Ottawa appeals ruling David Dodge must testify in cigarette smuggling case 

The federal government is appealing a ruling that the Bank of Canada governor, David Dodge, must testify at the fraud trial of tobacco company JTI-Macdonald Corp.

Ottawa's appeal is slated to be heard Thursday by Justice Marc Labrosse of the Ontario Court of Appeal.

Ontario Superior Court Justice Paul Rivard ruled Dec. 7 that Dodge, who was federal deputy minister of finance from 1992 to 1997, can be called by the company.

Dodge was among 15 former and current lawyers and staff of the governments of Canada and Quebec who were subpoenaed by JTI-Macdonald. Rivard ruled that all but two of the people called must testify.

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• Feds, Dodge try to evade tobacco trial 

The federal government is arguing that JTI-Macdonald Corp. and a number of its former tobacco executives facing fraud charges have no legal grounds to compel Bank of Canada governor David Dodge and other senior civil servants to testify at a preliminary hearing.

The defendants' request "has nothing to do with the preliminary," argued lawyer Ronald Slaght in Ontario Superior Court Monday.

Slaght, who has also been retained by the federal government in its $1.2-billion suit against JTI-Macdonald, suggested the request is a "fishing expedition" to find out information to defend the civil action. . . .

Lawyers for the defendants obtained subpoenas recently for 15 civil servants, including Dodge, a former deputy finance minister.

The other civil servants include the current deputy finance minister Ian Bennett, director general of the Canada Revenue Agency Fred O'Riordan, as well as three senior Ottawa-based Justice Department lawyers.

A number of the civil servants were interviewed by the RCMP during its investigation and made statements that the defendants' lawyers say are helpful to their clients.

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Tobacco firm didn't smuggle, court told 

A Canadian tobacco firm was charged in connection with a massive cigarette smuggling conspiracy even though senior federal bureaucrats told the RCMP the company wasn't involved, according to court documents.

Lawyers representing the federal government and the high-ranking civil servants are now trying to stop a court from hearing their testimony.

Among them is Bank of Canada governor David Dodge, who served as deputy finance minister from 1992 to 1997.

According to documents filed in the Superior Court of Justice, Dodge told the RCMP on Aug. 29, 2001 that Canadian tobacco companies were "quite keen" to deal with the problem of tobacco smuggling.

He also told the Mounties there was no indication that cigarette maker RJR-MacDonald Inc. was involved in cross-border smuggling alleged to have cost the Canadian government $1.2 billion in taxes in the mid-1990s, according to material filed in court by the company.

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• Tobacco firm didn't smuggle, court told 

A Canadian tobacco firm was charged in connection with a massive cigarette smuggling conspiracy even though senior federal bureaucrats told the RCMP the company wasn't involved, according to court documents.

Lawyers representing the federal government and the high-ranking civil servants are now trying to stop a court from hearing their testimony.

Among them is Bank of Canada governor David Dodge, who served as deputy finance minister from 1992 to 1997.

According to documents filed in the Superior Court of Justice, Dodge told the RCMP on Aug. 29, 2001 that Canadian tobacco companies were "quite keen" to deal with the problem of tobacco smuggling.

He also told the Mounties there was no indication that cigarette maker RJR-MacDonald Inc. was involved in cross-border smuggling . . .

Dodge is one of 17 senior government officials and lawyers whose testimony is sought by lawyers representing the former RJR-MacDonald Inc., now known as JTI-Macdonald Corp., at a preliminary hearing in Toronto that's been hearing evidence for almost 100 days.

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Nova Scotia Seeks Tobacco Smuggling Costs from JTI-Macdonald 

The province of Nova Scotia has filed a legal claim against tobacco manufacturer JTI-Macdonald Corporation (JTI) to recover $326 million in taxes given up when taxes were reduced to prevent smuggling in the early 1990s.

A notice of Crown claim was filed Friday, June 24, with Ernst and Young in Toronto, the court-appointed monitor who will evaluate the claims for JTI under provisions of the Companies and Creditors Arrangement Act, a form of bankruptcy protection.

"We reduced taxes to try and curb smuggling in 1994 and gave up hundreds of millions of dollars of revenue as a result," said Finance Minister Peter Christie. "Since JTI Macdonald profited from its participation in a smuggling scheme, we believe they should cover the cost picked up by Nova Scotians."

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