Philip Morris International, EU Near Deal in Smuggling Case
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
April 5, 2004
Altria Group Inc.'s Philip Morris International unit would pay about $1 billion to the European Union over a dozen years to fight smuggling and counterfeiting under a proposed deal to head off potential lawsuits, officials said Monday.
Philip Morris International said the draft agreement would "end past disputes" in which the EU accused cigarette makers of complicity in smuggling by intentionally oversupplying neighboring countries.
"What it really represents is moving from conflict to very firm and strong cooperation to work together," said Nerida White, a spokeswoman at the company's headquarters in Lausanne, Switzerland.
The EU confirmed it was in discussions with Philip Morris International to end potential lawsuits and cooperate on combatting cigarette smuggling -- which is estimated to cost EU governments billions in lost tax revenue annually.
The European Commission, the EU's executive arm, said a potential deal would result in "substantial payments" over a period of years. But it cautioned that the talks with the cigarette giant were not yet completed.
The spokeswoman said reports of $1 billion over 12 years were "reflective of the terms of the draft agreement."
Under the contemplated deal, Philip Morris International would pay $250 million within 60 days of signing a deal, according to a person familiar with the situation.
The Financial Times reported in its Monday editions that Philip Morris International was offering to pay $1 billion to the EU under a contemplated deal.
A spokesperson for Philip Morris International said that a draft agreement had not been finalized and was still subject to the approval of EU member states and the board of Philip Morris International. The terms of the draft agreement have been submitted to several EU member states, the company said.
Philip Morris International said the talks with the EU contemplate a long-term cooperation agreement to fight illegal trade in cigarettes. The cooperation would include customer-oversight policies and provisions for the tracking of products manufactured by Philip Morris International, the company said.
The European Commission in January said it was considering whether to launch legal action against individual tobacco companies after a U.S. court dismissed a cigarette-smuggling case. The commission said it could refile the suit under money-laundering laws.
In August 2001, EU regulators sued Altria, R.J. Reynolds Tobacco Holdings Inc. and Japan Tobacco Inc., accusing the cigarette makers of intentionally oversupplying countries in eastern Europe, so that the surplus would be smuggled into the 15-nation EU, resulting in billions of dollars in lost taxes. The U.S. District Court in New York threw out the case in February 2002 on procedural grounds, ruling that the U.S. cannot collect taxes on behalf of other countries.
But the European Commission appealed on the basis of the U.S. Racketeer Influenced and Corrupt Organizations Act, or RICO. Under the act, plaintiffs may be awarded up to three times as much as the damage incurred.
New York's Second Circuit Appeals Court in January upheld the earlier dismissal but ruled that the EU could file a new lawsuit based on money-laundering laws. EU regulators already filed a separate case against R.J. Reynolds in October 2002.
The commission initially brought the case on behalf of 10 EU countries -- Italy, Germany, France, Spain, Portugal, Greece, Belgium, the Netherlands, Finland and Luxembourg.
Philip Morris International, based in Lausanne, Switzerland, produces cigarette brands including Marlboro, L&M and Chesterfield. |
