US judge throws out European Union tobacco smuggling racketeering case on a technicality



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Tuesday 19 February 2002

19th February – immediate

Reacting to the news that an US judge has dismissed the European Union’s racketeering case against American tobacco companies, ASH expressed dismay that technicalities once again have protected tobacco companies from justice for their outrageous and lawless actions.

The cases alleged that major tobacco companies operate a ‘smuggling enterprise’ and effectively manage the black market for their products.  The European Commission and ten member states against Philip Morris and RJ Reynolds had brought cases – it was thought that British American Tobacco would be added to this case once the technicalities had been pleaded.  A separate case had also been brought by state governors of Colombia against British American Tobacco and Philip Morris, making similar allegations.

Clive Bates, Director of Action on Smoking and Health commented:

“It’s a bitter blow because these cases were extremely strong on the facts and argument, and have fallen on a technicality of US tax law.  The European Union alleged that the tobacco companies had facilitated large-scale cigarette smuggling and actively managed the black market, but the incredible quality and volume of evidence that backed the case was never heard in court.   

“This was never about using US law to collect taxes for foreign governments, but about punishing fraud, money-laundering and challenging business model that worked hand in glove with organised crime.” 

“Europe has been flooded with smuggled cigarettes made in the United States by American companies.  Our health and tax policy has suffered as a result.  The European Union should now bring actions in Europe.”

The cases had been brought under the RICO (Racketeer Influenced Corrupt Organisation) statute – the law originally introduced to tackle mafia and organised crime.

 

Notes

ASH resources on smuggling

ASH resources on RICO and tobacco smuggling

Associated Press (19 February 2002 – 2:40PM ET): District Judge Nicholas Garaufis rejected claims that cigarette makers intentionally oversupplied countries in Eastern Europe and elsewhere so the surplus would be smuggled into the 15-nation EU, resulting in billions of dollars in lost taxes. The same decision dismissed a similar suit filed in 2000 by the governors of 22 states in Colombia. Garaufis ruled that the plaintiffs in both civil cases failed to show that recent legislation and court decisions had nullified the “revenue rule” – a long-standing legal standard barring one country from enforcing tax claims by other countries.