- BRUSSELS, Belgium (Reuters)
- The European Union is accusing R.J. Reynolds Tobacco Holdings Inc. of
involvement in money-laundering scams -- some linked to the family of Iraqi
leader Saddam Hussein -- that cheated the EU out of excise tax revenue
on cigarettes.
-
- In a suit filed late Wednesday in the U.S. District Court
for the Eastern District of New York, the EU accused the maker of Winston
and Camel of selling cigarettes to crime syndicates that were trying to
launder the proceeds of illegal activities.
-
- R.J. Reynolds firmly rebutted the charges.
-
- "Any allegations that we were involved in, or aware
of, money-laundering, conspiracy or any other illegal activities are completely
absurd," the company said in a statement.
-
- "We believe this suit should be dismissed, as were
the other two EU cases filed in U.S. court," the Winston-Salem, North
Carolina-base company added.
-
- The complaint cites the involvement of organized crime
in Italy, Switzerland, the United States, Turkey, Cyprus and Montenegro,
according to a source familiar with the case.
-
- It names the elder son of Iraqi President Saddam Hussein,
Uday, as being involved in illicit tobacco trading linked to the company,
according to the complaint.
-
- "The purpose of this new claim is to obtain injunctive
relief to stop the laundering of the proceeds of illegal activities and
to seek compensation for the losses sustained," the European Commission
said in a statement.
-
- "The Commission is determined to win its fight against
money-laundering, cigarette-smuggling and connected serious cross-border
crimes," said Michaele Schreyer, EU budgets commissioner.
-
- CHANGE OF TACTICS
-
- The case marks a change of tactics in the EU's long-running
battle with the tobacco giants, some of which it accuses of smuggling cigarettes
into the bloc, costing its taxpayers an estimated $88.84 billion a year.
-
- It follows a failed attempt to sue R.J. Reynolds and
two other cigarette makers, Philip Morris and Japan Tobacco, in the U.S.
courts last year.
-
- A New York court threw out the smuggling suit on the
grounds that a U.S. court cannot enforce a foreign tax claim.
-
- The EU is appealing against that decision, but in the
meantime is pursuing the money-laundering charge as such activity is not
related to tax.
-
- The EU will claim its economies suffer due to the cost
of increased crime. Although it had not set a claim amount, the damage
amounted to "hundreds of millions of euros (dollars)," an EU
official said.
-
- Although the new case only targets R.J. Reynolds, EU
officials said they had not ruled out targeting other companies.
-
- "I don't exclude that further action may be taken
against other companies," a Commission official told reporters.
-
- Both Japan Tobacco and Philip Morris declined comment.
-
- IRAQ, MONTENEGRO CITED
-
- The complaint said Saddam Hussein's son Uday Hussein
"oversees and personally profits from the illegal importation of cigarettes
into Iraq."
-
- The shipments are a possible violation of United Nations
and U.S. trade embargoes.
-
- An official said this was a "minor part" of
detailed allegations of smuggling and money-laundering around the world.
-
- An official Iraqi interest spokesman in Washington could
not immediately comment on the case.
-
- Another part of the 145-page deposition concerns corruption
of public officials in the Balkans, including Montenegro.
-
- "Throughout the 1990s, huge amounts of money were
paid to public officials in Montenegro and elsewhere to guarantee the security
of the cigarettes and the illicit funds that were passing through the Balkans,"
the document says.
-
- A source added that there was no direct link to allegations
made by Italian prosecutors against the country's president, Milo Djukanovic,
about involvement in Mafia-led cigarette smuggling, allegations Djukanovic
has consistently denied.
-
- A tobacco sector analyst at Morgan Stanley in New York
said he doubted the EU's chances of success in U.S. courts.
-
- "There's ... a huge difference between selling a
product to someone who does something that's illegal, and doing it yourself.
Those are very, very different issues," analyst David Adelman told
Reuters.
-
- "Even if they did launder money, it's very unclear
that the case is appropriately being brought in the U.S," Adelman
added. "I think a lot of what the EU is trying to do is be recognized
as attacking the tobacco industry."
-
- The case is backed by 10 EU governments: Italy, Germany,
France, Spain, Portugal, Greece, Belgium, the Netherlands, Finland and
Luxembourg.
-
- R.J. Reynolds shares finished 5 cents, or 0.12 percent,
higher at $40.55.
-
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