[Intl-tobacco] Very Interesting: Colombia governors sue Philip Morris for tax evasion

[Robert Weissman]

Colombia governors sue U.S. tobacco giant
Source: Reuters, Wednesday, 5/24/00

Tuesday May 23, 9:17 pm Eastern Time

BOGOTA, May 23 (Reuters) - Colombia's provincial governors' said Tuesday
they filed suit in a federal court in New York alleging that U.S.-based
Philip Morris Cos. Inc., the world's largest cigarette maker, had avoided
paying the South American country of billions of dollars in tax and other
revenues.

Michael York, lawyer for Wehner & York which represents Phillip Morris,
said:  ``We're going to defend this vigorously . I absolutely believe we
will prevail.  The company has acted lawfully.''

``The allegations don't have any factual or legal merit,'' York said.

Jose Manuel Arias Carrizosa, executive director of Colombia's National
Federation of Provinces, said a news conference in the capital Bogota that
the complaint against Philip Morris, the maker of the top-selling Marlboro
brand, was unveiled in a U.S. District Court in New York last Friday.

The suit was filed by New York law firm Speiser, Krause, Nolan and Granito
on behalf of Colombia's 32 provincial governments and the capital district
of Bogota, Arias Carrizosa said.

The law firm could not be reached for immediate comment.

The National Federation of Provinces initially threatened to sue Philip
Morris (NYSE:MO - news) and British American Tobacco Plc(quote from Yahoo!
UK & Ireland: BATS.L) in May of last year, alleging the two companies had
conspired with local distributors to illegally under-bill imports of their
products to Colombia to avoid paying a hefty 65 percent duty.

Speiser, Krause, Nolan and Granito went much further in a statement
released at Tuesday's news conference in Bogota.

The law firm, which credits itself with specialising in landmark cases
throughout the United States for over 50 years, made no mention of British
American. But it leveled explosive ``racketeering'' charges against Philip
Morris.

``The lawsuit ... alleges that Philip Morris defrauded the government of
billions of dollars in revenue through a pattern of racketeering offences
involving money laundering and other violations of U.S. law,'' it said.

``The suit further alleges that the smuggling scheme was conceived,
designed and implemented at the highest levels of the defendants
corporations as a means of maximizing sales and profits,'' the law firm
said in its statement.

``Cigarette smuggling has become an important avenue for laundering
proceeds from illicit narcotics sales and another link in the drug
production cycle,'' it added.

Colombia's booming trade in contraband -- involving a whole catalogue of
goods ranging anywhere from Scotch whisky to television sets and
refrigerators -- has long been cited at one of the leading ways of
laundering the proceeds from narcotics sales abroad and funnelling the
money back into Colombia.

The Andean country produces an estimated 80 percent of the world's cocaine
and is a leading source of the high-grade heroin sold on U.S. streets.

The country of 40 million inhabitants also has a sizable demand for
tobacco, estimated at 30 billion cigarettes per year.

Colombia's top cigarette maker, Compania Colombiana de Tobaco, has long
alleged unfair competition, saying foreign-made imports to Colombia are
often billed at prices well below their retail value in the country of
origin.

The bulk of the tax revenues Colombia was reputedly defrauded of by Philip
Morris would have been paid into local government coffers to finance
health and recreation programmes.

Local spokesman for Philip Morris had declined comment when the suit was
threatened last May. Legal problems then temporarily blocked imports of
Marlboro cigarettes in the country, but they have resumed long since then.