EU Asks US for Help on Smuggling (fwd)

[Robert Weissman <rob@essential.org>]

May 8, 1998
Europe Inquiry on Smuggled Cigarettes Seeks U.S. Aid
By RAYMOND BONNER

VIENNA, Austria -- European governments, increasingly frustrated by the
rising volume of American cigarettes smuggled into Europe, have decided to
turn to Washington for help in investigating the suspected involvement of
American tobacco companies, starting with R.J. Reynolds Tobacco Co., a
senior European Union official said Thursday. 

          It will be the first time for the European Union to formally
request help from the U.S. government in combating the illicit cigarette
trade, and arises out of a conviction that the American companies are in
complicity, European officials said. Prosecutors in Europe say that American
tobacco companies have consistently resisted their efforts to obtain the
names of international customers in cases under investigation. Now they are
asking the U.S. government for assistance.  

          Authorities say they believe that the manufacturers routinely sell
American cigarettes to traders and dealers who immediately resell them into
black markets set up to evade foreign taxes and offer leading brands at a
discount.  "We are always puzzled how the cigarette manufacturers are paid
and the only way we can obtain this information is from them," Per Brix
Knudsen, director of the European Union's anti-fraud unit, which is based in
Brussels, said Thursday. "As Reynolds has previously refused any cooperation
whatsoever we intend to take up this issue with the U.S. authorities."  

          A spokesman for R.J. Reynolds International in Geneva, Axel Gietz,
said that the company not generally identify its customers but added that it
has "always cooperated with authorities." In an interview Thursday, Gietz
also said that the company was continuing to sell to a trader who told The
New York Times last year that his clients were smugglers. 

          Cigarette smuggling cost European governments $1.5 billion in lost
taxes last year, according to a report by the European Union's anti-fraud
unit released on Wednesday. Adding to the concern among European
governments, the report says that organized-crime syndicates are running the
smuggling operations. 

          Around the world, the largest tobacco companies are selling
billions of dollars of cigarettes each year into contraband pipelines, say
law-enforcement officials. In the last decade, the volume of smuggling has
nearly tripled, reflecting a general surge in cigarette smoking abroad,
especially of American brands. Experts have estimated that about one-fourth
of the cigarettes sold overseas now pass through smuggling rings. 

          In Washington, a spokeswoman for the Treasury Department said that
the government had "responded to similar requests from countries in the
past" and that in this case, "we anticipate trying to be as helpful as
possible."  The federal Bureau of Alcohol, Tobacco and Firearms is part of
the Treasury Department.  Two recent seizures of smuggled American
cigarettes highlight the problem in Europe. In one case, more than 80
million cigarettes, primarily Winstons worth more than $3 million, were
loaded by Reynolds, the second-largest tobacco company in the United states,
onto ships in Charleston, S.C. and Savannah, Ga., and sent to Greece. There
they were immediately loaded onto a single ship belonging to a smuggling
operation that took the contraband to Barcelona, Spain. Spanish customs
authorities intercepted the haul last January. 

          In the other case, Spanish authorities last October seized a ship,
the Sea Princess, carrying more than 120 million Winston cigarettes bound
for the contraband market.  The mastermind of the Sea Princess operation,
Spanish and Belgium investigators said, was Michael Haenggi, one of Europe's
biggest cigarette traders, who says he has been a Reynolds customer for 15
years and has frequently been a supplier to smugglers who bring Reynolds
cigarettes into Spain. 

          The Reynolds spokesman denied Thursday that the company knowingly
sold to smugglers, but he said that Reynolds had decided to keep Haenggi as
a customer even after Haenggi told The New York Times last summer that he
sold to clients he knew to be smugglers.  

          The seizure in Barcelona last January now occupies investigators
at the European Union's anti-fraud unit, as well as in Spain and Greece. The
huge cargo ship was stuffed with seven long-haul trucks loaded with American
cigarettes. It was one of the most sophisticated and well-organized
smuggling operations the European authorities have encountered.  The
shipment began when two boatloads of Winstons left the United States last
November, aboard the Zim Asia and the Dagmar Maersk. The bills of lading
show they were consigned to a Greek company, in the port city of Piraes,
Greece, near Athens.  

          Once they arrived in Greece, the seven truck trailers were loaded
onto a single ship bound  for Spain. When it reached the east coast of Spain
in the early morning hours of Jan. 2, it lowered its loading ramp, and the
trucks drove off into the dark. The drivers were arrested immediately. 

          "The key to this case lies with the American authorities," said a
Greek official. "They have to find out who paid Reynolds."  Investigators
are convinced that Reynolds knew the cigarettes were destined for the black
markets in Spain. "We intend to prove that," said Carlos Ramos Rubio, chief
of the anti-corruption office in Barcelona, and the prosecutor in the case.
He knows it will not be easy.  

          "Reynolds is very powerful," he said. "It's not easy to take them
on. Reynolds will say they sold the tobacco legitimately, and it is not
their responsibility to follow what happened to it."  

          Indeed, Gietz, the Reynolds spokesman, said that Reynolds had sold
the cigarettes to a company with which it had "a longstanding relationship."
He said that company policy did not allow him to reveal the customer's name. 

          Officials at the European Union find it hard to believe that a
company would sell more than 80 million cigarettes without knowing where
they were going. Gietz said that the company checked on customers before
selling to them. That included Haenggi, he said.  

          Last August, in an interview published in The Times, Haenggi told
of one instance in which he sold 160 million cigarettes, to a Panamanian
company, which then smuggled them into Spain by ship. Another time, he said,
he supplied 220 million cigarettes, to a company registered in Aruba, which
then smuggled them into Spain aboard planes leased in Ukraine.  Gietz said
that after article appeared, Haenggi had been closely questioned by
Reynolds, and that the company had decided to continue its relationship with
him. 

                     Copyright 1998 The New York Times Company