Citizens for Clean Air and Clean Lungs

RJR Subsidiary Pleads Guilty To Cigarette Smuggling Scheme

Complete New York Times account by Christopher Drew

RJ Reynolds International affiliate Northern Brands International (NBI) pleaded guilty to charges that it smuggled cigarettes into Canada to avoid paying over $2.5 million in US excise taxes. NBI agreed to pay a $15 million fine for its involvement in a scheme to transfer cigarettes out of Canada under the guise of exporting them to Eastern Europe, then smuggling the cigarettes back into Canada through an Indian reservation in New York state to avoid US excise taxes.

The smuggling operation, which involved at least 26 tractor loads of cigarettes, took place from 1994 to 1995. US District Attorney Thomas Maroney accused RJR of setting up Northern Brands specifically for smuggling. "This company knew what it was doing and knew where its products were going," Maroney said. RJR issued a statement calling NBI's actions "inconsistent with the way Reynolds does business," and said the "company very much regrets this episode."

Matt Myers, of the National Center for Tobacco-Free Kids, commented that the guilty plea may explain tobacco companies' protests that high excise taxes lead to smuggling: "Now we know why RJR executives knew how many packs of cigarettes fit into a tractor trailer.

Public health advocates have suspected for years that the tobacco industry was behind the black market between the United States and Canada. The guilty plea demonstrates that the primary black market that occurred is directly tied to the tobacco industry or its affiliates." US Customs Commissioner Raymond Kelly expressed his hopes that the smuggling activities "are not indicative of a new kind of cancer that can be linked to the tobacco companies in the future."

WASHINGTON POST, (12/23/98) "Tobacco Affiliate Pleads Guilty To Role In Smuggling Scheme", John Schwartz and Saundra Torry, p. A2
NEW YORK TIMES, (12/23/98)"RJR Subsidiary Pleads Guilty To Smuggling", Christopher Drew, p. A1
USA TODAY, (12/23/98) "Tobacco Fine", John Bacon, p. A3
ASSOCIATED PRESS, (12/23/98) "$15M Fine In Tobacco Smuggling Case", William Kates
UPDATE: March 26, 1999: RJR Executive Pleads Guilty In Smuggling Case
A former executive at Northern Brands International, a subsidiary of RJR Nabisco Holdings, pled guilty yesterday to helping smugglers sell $700 million worth of cigarettes on the Canadian black market.

Leslie Thompson, a former regional director, was the first tobacco executive charged in the investigation. Thompson could face up to seven years in prison. Nineteen other people have been convicted in the case and are awaiting sentencing.

WALL STREET JOURNAL, (3/26/99) "Former RJR Official Pleads Guilty To Role In Cigarette Smuggling", Associated Press, p. C19
ASSOCIATED PRESS, (3/26/99) "Tobacco Exec. Charged With Smuggling"

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