EU files money-laundering suit against RJ Reynolds in NY court

BRUSSELS – The European Union said yesterday it has filed a civil lawsuit in a New York court against US tobacco company RJ Reynolds seeking compensation for alleged money laundering. More companies were expected to be named later. Officials would not put an amount on the practice, but said it dates back a decade and involves hundreds of millions of dollars. They said their proof came from «shipping papers, witness statements and customs documents.» The European Commission said in a statement that it sought «relief to stop the laundering of proceeds of illegal activities and to seek compensation for losses sustained.» The case, contained in a 156-page filing with the US District Court for the Eastern District of New York, stems from a tax evasion case the EU and 10 EU governments have initiated against RJ Reynolds, Philip Morris and Japan Tobacco Inc. RJ Reynolds was part of RJR Nabisco Corp. of the United States until 1999 when Japan Tobacco acquired it. On Feb. 19, a New York district court dismissed the tax evasion claim allegedly involving billions of euros in lost revenues due to cigarette smuggling, saying it has no jurisdiction in foreign tax issues. The Europeans are appealing that ruling, which also left open the possibility to pursue a money-laundering case in a civil lawsuit. Officials familiar with the case said other tobacco companies besides RJ Reynolds would be named, but they did not identify them. They said money laundering involved cigarettes paid for with money from illegal drugs and arms trade and from participants in organized crime. The cigarettes ended up in Europe and beyond, including Iraq, through intermediaries in Panama, Switzerland, Cyprus, Turkey, Montenegro and other countries. Uday Hussein, eldest son of Iraqi President Saddam Hussein, has for years been importing cigarettes into Iraq earning $10 million a year in «taxes» from legal and illegal cigarette imports, The Wall Street Journal reported yesterday. It quoted a tobacco company lawyer as saying illegal sales of cigarettes can occur in many ways without tobacco companies being aware of that. Supporting the EU head office in its money-laundering case are the governments of 10 EU nations: Italy, Germany, France, Spain, Portugal, Greece, Belgium, the Netherlands, Finland and Luxembourg. In its tax case against RJ Reynolds, Philip Morris and Japan Tobacco, which is now going to appeal, the EU alleges that American tobacco companies intentionally oversupplied countries in Eastern Europe and elsewhere so the surplus would inevitably be smuggled into the EU. The EU head office estimates several billions euros in taxes are lost every year due to smuggling of cigarettes from Eastern Europe and the Middle East into the 15-nation bloc. The Commission said it would make no further comment on the content of its complaint, but said the document could be consulted at the clerks office of the US District Court for the Eastern District of New York. Similar cases accusing tobacco companies of abetting smugglers brought by Canada and Columbia and an earlier case by the EU last year, have also been rejected by US courts.

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