TORONTO—While the government is touting the $550 million it will get from tobacco companies for tobacco they smuggled into Canada to avoid taxes, the health association that pushed for the suit is calling it a “sell out.”
The suit and prosecutions arose over tobacco smuggling in the early 1990s that the Non-Smokers’ Rights Association calls “the largest and most destructive fraud in the history of Canadian business and public health.”
Garfield Mahood, executive director of the group, says the $550 million that the federal and provincial governments got from the tobacco companies is a tiny fraction—6 cents on the dollar—of the $10 billion they originally filed for.
But the government says closing the deal will allow it to focus on current efforts to stop smuggling.
Under the settlements, R.J. Reynolds Tobacco Co., maker of Camel, Kool, Export A, and others, will pay a $325 million settlement; JTI-Macdonald Corp, maker of Benson & Hedges and Camel cigarettes sold outside the U.S., will pay a $150 million fine; and Northern Brands International, a subsidiary of R.J. Reynolds, will pay a $75 million fine.
JTI-Macdonald also pleaded guilty in the Ontario Court of Justice to a single count of “aiding persons to be in possession of tobacco not packaged in accordance with the Excise Act,” while Northern Brands International Inc., a company related to RJR, pleaded guilty to a conspiracy offence under the Criminal Code.
Keith Ashfield, Minister of National Revenue, and Denis Lebel, Minister of State for the Economic Development Agency of Canada for the Regions of Quebec, announced the settlements on Tuesday.
“Our government is actively working to make sure that companies in Canada do not profit from illegal activity,” said Ashfield.
“The settlement agreements bring closure to issues that have been outstanding for more than a decade so that governments can focus on tobacco tax compliance and contraband tobacco.”
The settlement also requires JTI-Macdonald, a Canadian tobacco manufacturer, to assist governments in the battle against contraband tobacco.
High tobacco taxes sparked the wave of cigarette smuggling in the 90s through native reserves along the U.S-Canada border. Stan Smith, who was vice-president of sales for the former RJR-MacDonald at the time, pleaded guilty in 2006 to overseeing a conspiracy to smuggle cigarettes into Canada to get around the taxes, defrauding the government of over $1 billion in revenue.
He was sentenced to eight months of house arrest for his role in the conspiracy.