$1.1 billion Canada's two biggest cigarette companies to pay for abetting smugglers
Jump to full article: Montreal Gazette (ca), 2008-08-01
Author: WILLIAM MARSDEN The Gazette
Intro: 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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