Canada tobacco firms admit aiding smuggling

Thu Jul 31, 2008 1:28pm EDT
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By David Ljunggren

OTTAWA (Reuters) - Two Canadian tobacco firms admitted on Thursday they had aided the contraband tobacco trade and will pay out more than C$1 billion ($980 million) in record fines and payments to boost anti-smuggling efforts over the next 15 years.

The two firms are Imperial Tobacco Canada Ltd -- a unit of British American Tobacco -- and Rothmans Benson & Hedges Inc, a unit of Philip Morris and Rothmans Inc.

The charges relate to the years between 1989 and 1994, when tobacco taxes in Eastern Canadian provinces were so high that they prompted widespread smuggling.

Tobacco exported from Canada to the United States was then illegally brought back into the country.

"The result we've seen today brings to a close a significant chapter in contraband tobacco history ... the message sent today is that no company is above the law," said Mike Cabana of the Royal Canadian Mounted Police.

Both tobacco companies admitted in court to a single charge of "aiding persons to sell and be in possession of tobacco manufactured in Canada that was not packed and was not stamped in conformity with the Excise Act and its amendments and ministerial regulations."

Imperial Tobacco paid a C$200 million fine and Benson and Hedges paid a C$100 million fine. Canadian police said the fines were a record.

In addition, Imperial Tobacco Canada agreed to pay up to C$400 million more over the next 15 years to fund various anti-smuggling efforts. Rothmans Benson & Hedges Inc will pay C$450 million more over the next 10 years.   Continued...