Last updated: April 14, 2010
Source: Montreal Gazette
JTI-Macdonald Corp. and R.J. Reynolds also reached a settlement in a lengthy civil suit with the provincial and federal governments.
The companies paid their fines Tuesday morning after pleading guilty in the Ontario Court of Justice, the federal government said in a news release.
“Taken together, this is the largest amount ever levied in Canada,” National Revenue Minister Keith Ashfield told a news conference.
The fines, combined with the civil settlement, will put a total of $550 million in provincial and federal coffers, bringing an end to a decade of litigation involving contraband tobacco shipped between the United States and Canada.
Cigarette smuggling raged through the early 1990s, forcing governments in Canada to eventually reduce tobacco taxes to stem the tide of contraband flowing across the border.
JTI paid $150 million after pleading guilty to “aiding persons to be in possession of tobacco not packaged in accordance with the Excise Act,” the federal government said in a release.
Northern Brands International Inc. — a company affiliated with R.J. Reynolds — pleaded guilty to a Criminal Code conspiracy and paid a $75-million fine ordered by the court.
An anti-smoking group on Tuesday condemned the deal with the governments as a settlement for “chump, saying it amounted to a “sell-out” and a “sweetheart deal” that fell far short of the amount the government originally sought.
“In court papers from 2005, the federal and provincial governments filed claims for nearly $10 billion against JTI-Macdonald Corp. and related companies over contraband,” said Garfield Mahood, executive director of the Non-Smokers’ Rights Association
“The settlements prove that tobacco crime does pay, big Time, as it has for decades. The government settled for “chump change”.”
The civil settlements with the two companies come two years after the federal and provincial governments settled with other cigarette makers — Imperial Tobacco and Rothmans, Benson and Hedges, which paid fines of $200 million and $100 million, respectively, in separate court actions.
The federal government thus labelled Tuesday’s fine as the biggest, when added together, because they considered the cases one file, dealt with by one judge, rather than separate cases.
The money in the latest civil settlement will be shared between the federal government and the provinces, with Ontario, Quebec, British Columbia, and Ottawa receiving the biggest settlements because they were the ones that lost the most.
A spokesman for the Canada Revenue Agency said the fines and settlement amount to more than the governments lost in excise taxes.
(Photograph by Stringer, Reuters)