[Intl-tobacco] Ex-VIPs At Tobacco Firm Helping Probe (fwd)

[Robert Weissman]

Ex-VIPs At Tobacco Firm Helping Probe

Some have tried to swing immunity or special-sentencing deals with
Canadian authorities by WILLIAM MARSDEN / The Gazette
Source: Montreal Gazette, Saturday, 4/8/00

Former senior tobacco executives at RJR-Macdonald Corp., including No.-2
man Stan Smith, have been co-operating with a criminal investigation into
allegations that the tobacco giant defrauded the federal government of
billions of dollar in taxes in the early 1990s.

Some executives have attempted to swing immunity or special-sentencing
deals with Canadian authorities in return for their co-operation, sources
said.

Smith was the first to break the wall of silence that for years had
protected big tobacco against inquiries into the role it played in
supplying cigarettes to smugglers during the high-tax era of 1989 to 1994.

Smith resigned from Toronto-based RJR-Macdonald in 1998 about one year
after discovering that both Canadian and police in the United States were
investigating RJR.

Through his Toronto lawyer, he approached the RCMP for an immunity deal.

Police refuse to say whether he or any other executive has been granted
immunity.

Sources said Smith has spilled the beans about what went on in the
executive suites of RJR during the smuggling era. Smith last summer sold
his house in Oakville, Ont., and moved to Britain.

The only RJR executive to be charged in Canada is Les Thompson. He pleaded
guilty in February to one charge of conspiring to defraud the Canadian
government of about $1 billion. In return for his ongoing co-operation, he
was given a three-year suspended sentence.

RJR has claimed Thompson and Smith, who has not been charged, were
essentially lone wolves and rogue tobacco traders who broke company policy
on smuggling and took millions of dollars in kickbacks.

RJR lawyer Douglas Hunt said at Thompson's sentencing hearing that the
company intended to file a victim- impact statement claiming that RJR
suffered "physical or emotional loss" because of the criminal conduct of
Thompson and Stan Smith.

Prosecutor Michael Bernstein stated, however, that Thompson's actions were
"part and parcel of a corporate strategy developed largely by other senior
executives who closely monitored and supervised his work."

Thompson, 52, was a top RJR sales executive. RJR sent him to Winston-Salem
in 1992 to manage sales for Northern Brands International Inc., a newly
formed affiliate of RJR Nabisco, the RJR holding company. Northern Brands
(NBI) was used to funnel more than $110 million U.S. worth of Canadian
tobacco products to smugglers on the Canadian-U.S. border.

The company pleaded guilty in Syracuse, N.Y., in December 1998 to
smuggling related charges and paid $15 million in fines and forfeitures.

Thompson pleaded guilty in Syracuse last year to money laundering and is
currently serving a 70-month sentence.

He also paid a $20,000 fine and forfeited $100,000 U.S.

Thompson is co-operating with a grand-jury investigation into tobacco
smuggling in North Carolina.

Other executives who have spoken to the RCMP include Franco Gabrieli,
former head of RJR-Macdonald's duty-free sales in the U.S. and Peter
MacGregor, who worked side-by-side with Thompson at Northern Brands.

Gabrieli lives in Winston Salem, where he runs a tobacco export business.

MacGregor was a former executive at RJR-Macdonald until he was transferred
along with Thompson to Winston-Salem, N.C., to help manage NBI.

MacGregor resigned from NBI in 1998 after U.S. authorities informed the
company it was under investigation. He moved to Atlanta, Ga., where he
took a job with Porsche America.

Other RJR executives who held senior positions in the company during the
heyday of tobacco smuggling have either retired or been transferred to
Asia or Europe.

Roland Kostantos, former controller and chief executive officer at
RJR-Macdonald, is in Geneva along with former vice-president Paul Neumann.

Former RJR-Macdonald president and CEO Ed Lang is retired and living in
Florida.

The Royal Canadian Mounted Police have attempted to speak to him but they
refuse to say if they succeeded.

RJR-Macdonald, which is now called JTI-Macdonald Corp. after it was taken
over last year by Japan Tobacco, has said that it is co-operating with the
federal government on the criminal investigation.

The company is trying to negotiate a global settlement. According to
sources, an offer of $100 million last year was rebuffed.

The federal government sued RJ Reynolds and its affiliates in December
claiming $1 billion U.S. in damages from tobacco smuggling.

The suit was launched in Syracuse, N.Y., under U.S. civil racketeering
laws that allow plaintiffs to obtain treble damages if they win.