[Intl-tobacco] LAT: Philip Morris Asks to Settle Smuggling Suits (fwd)

[Robert Weissman]

Philip Morris Asks to Settle Suits
Courts: Firm proposes a meeting with Colombian and EU lawyers in two cigarette
smuggling cases.
by MYRON LEVIN, TIMES STAFF WRITER
Source: Los Angeles Times, Saturday, 7/21/01

Philip Morris Cos. is proposing settlement talks with the European Union
and a group of Columbian states that have sued tobacco companies for
allegedly promoting a global wave of cigarette smuggling.

The settlement idea was floated in a letter to plaintiffs, a copy of which
was filed Friday in U.S. District Court in Brooklyn, where the EU and
Colombian suits were filed last year.

In the letter, Philip Morris suggested a meeting to determine whether the
claims "could be negotiated and resolved." At such a meeting, the company
would present "specific proposals, including concrete steps that Philip
Morris can take to support the governments' anti-contraband efforts," the
letter said. The letter was sent to Kevin A. Malone, a Florida lawyer who
represents plaintiffs in both cases. Malone declined to comment Friday.

The Colombian case, filed in May 2000, accuses Philip Morris and British
American Tobacco, the two leading private cigarette makers, of encouraging
and profiting from smuggling operations that have cheated 22 provincial
governments of tax revenues.

The EU case, filed in November on behalf of the union's 15 member
countries, seeks damages from Philip Morris and R.J. Reynolds Tobacco. The
suit also names Japan Tobacco Inc., which acquired RJR's international
operations in 1999. The companies say they aren't responsible for
smuggling of their products.

The letter cited U.S. District Judge Nicholas Garaufis' suggestion that
the parties discuss ways to reduce "the future prospects of contraband
cigarettes entering into the European Union or Colombia."

Max R. Shulman, a New York lawyer for British American, said his client
was aware of the Philip Morris overture, and "has always been willing to
talk . . .  about various things that can be done."

Garaufis dealt a blow this week to efforts by the companies to have the
cases thrown out. In his ruling Tuesday, Garaufis agreed with cigarette
makers that the EU had no standing to sue, because it couldn't show that
smuggling caused it economic harm. But Garaufis left room for EU member
countries to seek damages individually, sweeping aside defense contentions
that cases of this type could not be brought by anyone.

The industry had sought dismissal of the cases under a common law doctrine
known as "the Revenue Rule," which essentially prevents U.S. courts from
helping foreign governments collect taxes.

In a ruling that is under appeal, a federal judge in Syracuse, N.Y., last
year cited the Revenue Rule in dismissing claims by Canada against R.J.
Reynolds, which had been accused of conspiring to smuggle cigarettes to
evade Canadian taxes. But Garaufis declared that the rule does not bar him
from considering the European or Colombian claims.

Philip Morris' overture to the plaintiffs was dated July 12, but a copy of
the letter was not entered in the court files until Friday.

The lawsuits reflect growing international anger over the
multibillion-dollar trade in smuggled cigarettes, which critics say cheats
governments of revenue and boosts smoking rates by keeping supplies of
cheap cigarettes in the market.

The cases have been inspired by scores of internal documents suggesting
that multinational tobacco companies knowingly traded with smugglers and
relied on smuggling to compete with rivals, whom they assumed were engaged
in it, too.  Most of the documents have come from British American Tobacco
files.