Tobacco.org

Philip Morris extends bid for Rothmans after acquiring 67.8 per cent of shares 

U.S. tobacco giant Philip Morris International Inc. (NYSE:PM) has extended its privatization bid for Rothmans Inc. (TSX:ROC) to Sept. 29 after acquiring just over two thirds of the Canadian company.

Philip Morris said Wednesday it had acquired 47 million shares of Rothmans or 67.8 per cent of Canada's second-biggest cigarette maker under its $30 a share bid.

John Barnett, president and CEO of Rothmans, said the takeover will help the Toronto company grow.

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Offer by Philip Morris International Inc. (PMI) for Rothmans Inc. successful; PMI extends offer 

Rothmans Inc. announced today that approximately 47,004,961 common shares representing approximately 67.8% of the outstanding common shares of Rothmans Inc. (on a fully-diluted basis) have been tendered to the offer made by PMI.

PMI has taken up all of the common shares which were tendered and will pay for such shares on September 19, 2008. Shareholders of Rothmans Inc. who tendered common shares to the offer will receive C$30.00 cash per share.

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• Smuggling fine was a bargain 

A former executive with the holding company that once owned Imperial Tobacco says the agreement reached in July to settle federal and provincial claims on smuggling was little more than "chump change" compared with what the company earned during the smuggling era in the late 1980s and early 1990s.

Paul Finlayson, who for 16 years was an executive at Imasco, which once owned Imperial, said the government basically caved in to tobacco interests when it made what he claimed was a token settlement with Imperial and Rothmans Inc.

Finlayson said Imperial earned $600 million to $700 million a year during the smuggling era when the company "lubricated" a system that defrauded Canadian governments of billions of dollars in unpaid taxes. . . .

Now retired, he said in an interview that the $600-million settlement with Imperial represented a small fraction of the profits Imperial earned during that period and an even smaller fraction of the taxes and duties governments lost to smuggling.

The Canada Revenue Agency refused to comment on Finlayson's statements. . . .

Finlayson, who managed operational systems at Imasco, said he prepared the operational plans for sending Imperial cigarettes tax-free into the United States, where they were later sold to smugglers who brought them back into Canada through the Akwesasne Six Nations reserve near Cornwall, Ont. . . .

"The RCMP knows all about this. They could have walked in and just handcuffed everybody at Imperial," he said, adding that the government did "not have the guts of a field mouse to go after the executives of the company." He admitted that this group could have included him.

He said he was speaking out because he believes Imperial crossed the line. "The envelope was being pushed a little bit beyond what I could tolerate it being pushed." He said he left Imasco during this period.

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The RCMP knows all about this. They could have walked in and just handcuffed everybody at Imperial . . . . [The Canadian government didn't] have the guts of a field mouse to go after the executives. . . . [T]hey had Imperial cold, on the ground screaming. (But) they reached down and gave it a hand and pulled them up and said, 'Ah, give us 50 million bucks and we'll forgive and forget.'
Paul Finlayson, who for 16 years was an executive at Imasco, which once owned Imperial Tobacco Canada. Finlayson said he developed the company's 1994 smuggling/tax evasion model.

Imperial Tobacco Canada, federal government and provinces reach resolution on contraband tobacco investigation 

Today in Montreal, the Company entered a plea of guilty to a regulatory violation of a single count of section 240 (1) (a) of the Excise Act and has paid a fine. The Company has also entered into a 15-year civil agreement (the Comprehensive Agreement) with the federal and provincial governments.

"We are pleased to have resolved this issue," said Benjamin Kemball, president and CEO of Imperial Tobacco Canada. "Today's events give our business the stability it needs to move forward to address, with clarity and focus, the issues, opportunities and challenges it faces today and will face in the future."

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WASHBURN: Lack of ethics in business harms companies, individuals  

When the $1.15-billion fine against Imperial Tobacco and Rothmans' Benson & Hedges was announced last week, it was a paltry sum compared to the companies' actions. . . .

Socrates said, "Vice harms the doer." Even if no one ever finds out and we can get away with doing something wrong, the act hurts us more than it hurts the victims.

But in a cynical world, Socrates appears to be talking into the wind. No one pays attention to this kind of thinking any more. Since Gordon Gekko announced in the filmWall Street,"Greed is good. Greed works," a generation of MBA students has felt it had a license to do whatever it takes to make money.

And, this is the heart of the problem. When people lose trust in business, business loses even more. Business loses when we think every time a corporation sends out a press release, it is full of lies. . . .

Businesses need to take this issue of trust more seriously. It is true; one bad apple spoils the barrel. Not only does it undermine the fundamental economics of the 21st century, but it also deepens the pervasive cynicism, which is a trademark of our times. This distrust spreads like a cancer through all aspects of our lives.

If there is a way out, it will not be legislated. Morals cannot be successfully turned into laws. It is only the actions of individuals of conscience that will make this change possible. It is going to take a massive change of heart. Sadly, it is hard to see how that will happen.

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LETTER: SHATENSTEIN: Cough, cough 

Funny as your Aug. 2 editorial cartoon was - likening tobacco executives to sewer rats - it truly is an example of art imitating life. Just a day earlier, after the $1.15-billion fine was imposed on Canada's two leading cigarette manufacturers, Imperial Tobacco spokeswoman Catherine Doyle told CTV, "We realize ... we're going to take a hit to our reputation because of this."

She should be fined another billion dollars by the irony police for that statement. When your industry pushes products that lead 45,000 Canadians to an early grave every year (according to Health Canada), what reputation do you have for anyone to hit?

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Big tobacco to pay record fines after guilty plea 

Two of Canada's biggest tobacco companies will pay record-setting fines after pleading guilty to tax charges laid in connection with contraband cigarettes.

Imperial Tobacco Canada Limited and Rothmans Benson and Hedges pleaded guilty to "aiding persons to sell and be in possession of tobacco manufactured in Canada that was not packed and was not stamped in conformity with the Excise Act."

Imperial Tobacco will pay $200 million in fines and Benson and Hedges was fined $100 million.

"Based on our estimates, by (the companies) paying these fines, they will not be making any profits out of the (illicit) activities they had in the past," Revenue Minister Gordon O'Connor said at a press conference held in Ottawa on Thursday.

The companies have also committed to help combat contraband tobacco activities in Canada.

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Canadian Companies Settle Cigarette Smuggling Case 

Two Canadian tobacco companies agreed to pay criminal fines and civil penalties totaling about 1.15 billion Canadian dollars after admitting Thursday that they had aided cigarette smugglers.

An eight-year investigation of Imperial Tobacco Canada and Rothmans, Benson & Hedges by the Royal Canadian Mounted Police covered events beginning in the late 1980s. At that time, high Canadian taxes intended to discourage smoking prompted a wave of cigarette smuggling from the United States that continued for several years.

Under the settlement reached with the federal government and all of Canada's provinces, the companies acknowledged in a guilty plea on Thursday that they had known that cigarettes sold to wholesalers in the United States were swiftly returned to Canada for sale on the black market. . . .

Much of the cigarette smuggling took place through a Mohawk Indian reservation that spans the international border along the St. Lawrence River near Massena, N.Y.

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Imperial, Rothmans Agree to Pay C$1.15 Billion Over Smuggling  

Imperial Tobacco Canada Ltd. and Rothmans Inc., Canada's two biggest tobacco companies, agreed to pay about C$1.15 billion ($1.12 billion) in fines and penalties to settle charges they aided cigarette smuggling in the 1990s.

Imperial, the Canadian unit of the U.K.'s British American Tobacco Plc, was fined C$200 million after admitting it helped people sell untaxed cigarettes, the Royal Canadian Mounted Police said. Toronto-based Rothmans, which makes Benson & Hedges, also pleaded guilty and was fined C$100 million.

``These are the largest fines ever levied in Canada,'' Mike Cabana, the RCMP's assistant commissioner, said at a news conference in Ottawa. ``The message sent today is that no company is above the law.''

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Big tobacco to pay $1.15 billion over contraband product 

Two of Canada's biggest tobacco companies will pay $1.15 billion in criminal and civil penalties after pleading guilty to customs charges related to contraband cigarettes and smuggling.

Under separate court settlements in Montreal and Toronto on Thursday, Imperial Tobacco Canada Limited was fined $200 million and Rothmans Benson & Hedges (TSX:ROC) $100 million as part of the criminal charges.

The companies will pay another $815 million in civil damages to the federal and provincial governments over the next 15 years.

In total, Ottawa will receive $575 million, with the provinces getting the rest of the $1.15 billion.

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• Executives revealed how cigarettes got into Canada 

The investigation into Canada's three major tobacco companies for aiding and abetting smuggling in the late 1980s and early 1990s began eight years ago, after The Gazette ran a series of articles alleging the companies were the main black market suppliers.

Central to The Gazette stories were a tobacco smuggler, who has since committed suicide, and two former tobacco sales executives who oversaw a scheme to funnel billions of Canadian brand cigarettes to the black market.

Les Thompson, an RJR Macdonald sales executive, described in interviews in hotel rooms in Ontario and Quebec how RJR Macdonald (now called JTI-Macdonald) established separate offices and companies in Toronto and the United States to oversee the funnelling of its brands, like Export A, to smugglers. . . .

Another key witness is former RJR Macdonald vice-president Stan Smith, who was Thompson's boss. Smith pleaded guilty in Ontario in 2006 and was sentenced to eight months of house arrest. He had been co-operating with police since 2000. . . .

The articles also focused on the role played by Imperial Tobacco and Rothmans. Both companies sent huge shipments of Canadian brand cigarettes into the U.S. under the pretext they were supplying the duty-free market. In fact, the cigarettes were simply sold back into Canada. . . .

Smugglers told The Gazette that company sales representatives regularly showed up at the smuggling spots and warehouses near Cornwall and Buffalo, N.Y., to take inventory.

After The Gazette articles, in 1998 and 2000, Imperial and Rothmans both denied any role in the smuggling.

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Philip Morris offers $2B for Canada's Rothmans 

As Philip Morris International Inc. made a friendly $2-billion takeover offer for Canadian cigarette maker Rothmans Inc. yesterday, some investors quickly started betting the U. S. tobacco titan will have to cough up more money to clinch a deal.

Soon after the deal was announced, Rothmans' stock price shot above the $30-a-share, all-cash offer -- a sign that at least some investors expect a higher price.

Fuelling that notion is the fact that the Canadian cigarette maker's largest shareholder is Jarislowsky Fraser Ltd., a pension fund well known for pushing for sweeter offers in takeover situations involving companies in which it has invested.

It has a roughly 14% stake in Rothmans, the No. 2 cigarette maker in Canada. . . .

The $30 a share bid is a roughly 16% premium to where Rothmans' shares were trading before the company yesterday unveiled the takeover offer and a long-awaited settlement with regulators over cigarette smuggling charges.

But investors who stand to lose Rothmans' generous dividend may seek more money, industry observers said.

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• RCMP Closes Book on Historic Tobacco Investigations 

The Royal Canadian Mounted Police (RCMP) announced it has concluded a long-running file after two of Canada's largest tobacco companies entered guilty pleas this morning in response to indictable offences under Section 240(1)(a) of the Excise Act.

The guilty pleas, from Imperial Tobacco Canada Limited (ITCL) and Rothmans Benson & Hedges (RBH), are the culmination of more than eight years of investigative work by RCMP Customs and Excise sections in Ontario and Québec. As part of agreed statements of fact, the two companies admitted to "aiding persons to sell and be in possession of tobacco manufactured in Canada that was not packed and was not stamped in conformity with the Excise Act and its amendments and Ministerial regulations." . . .

The material time of the charges involved illegal activity between the years of 1989-1994. Then, the contraband tobacco market in Canada involved product being produced in Canada, and shipped to locations in the US near the Canada/US border. From there, it was distributed to smugglers or black market distributors who brought it back into Canada for further illegal distribution.

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As part of agreed statements of fact, the two companies admitted to 'aiding persons to sell and be in possession of tobacco manufactured in Canada that was not packed and was not stamped in conformity with the Excise Act and its amendments and Ministerial regulations.'
RCMP, on the guilty pleas of Imperial Tobacco Canada and Rothmans Benson & Hedges.

• Tobacco firms cough up 

Imperial Tobacco Canada and Rothmans Inc., Canada's two largest tobacco manufacturers, have pleaded guilty to aiding and abetting the smuggling of cigarettes in the 1980s and 1990s and agreed to pay fines and penalties totalling more than $1.1 billion in an unprecedented settlement of criminal and civil cases.

The amount represents the "largest criminal fines and civil settlements in Canadian history," federal Revenue Minister Gordon O'Connor said at a news conference in Lévis yesterday. The settlement ensures the companies do not benefit financially from the smuggling, he added.

"I believe we are sending some strong and clear messages. Firstly, that such activity will not be tolerated. And secondly, that no company is above the law."

The settlements "close a significant chapter in contraband tobacco history," RCMP Assistant Commissioner Mike Cabana said. . . .

In addition to the fines, Imperial and Rothmans will each pay $50 million to establish a new government Contraband Tobacco Enforcement Strategy. The payments are due by Dec. 15.

To settle civil liability, Imperial is to pay the federal government and the provinces a percentage of its annual net sales revenue over the next 15 years, to a maximum of $350 million. Rothmans is to pay $200 million over the next 10 years, at a rate of $20 million per year. The first payment is to be made on Dec. 31, 2009. . . .

Just as the tobacco companies lied for years about the deadly health effects of smoking, Damphousse noted, they also lied originally about their involvement in smuggling.

"They have made lying a regular corporate practice," he said.

Cheap contraband cigarettes helped increased smoking rates among young people, damaging the health of thousands of Canadians, Damphousse added.

It was regrettable the RCMP did not charge any of the company executives, he said. . . .

Rothmans said the settlement opened the door to the sale of the company to Philip Morris International Inc. for $2 billion. The deal was contingent on the company settling its criminal and civil cases. . . .

If found guilty, JTI-Macdonald could face extensive forfeiture to the Crown equivalent to the amount of the fraud.

But getting money out of the tobacco firm could be difficult. The company filed for bankruptcy protection in 2004 after Quebec assessed it for $1.36 billion in unpaid taxes dating from the early 1990s.

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Record fines leveled in tobacco smuggling case 

Canada's two largest tobacco manufacturers have pleaded guilty to aiding and abetting in the smuggling of cigarettes in the 1980s and 1990s and have agreed to pay fines and penalties totalled more than $1.1 billion in an unprecedented settlement of criminal and civil cases.

Federal Revenue Minister Gordon O'Connor said the settlements involving Imperial Tobacco Canada and Rothmans Inc. were the "largest criminal fines and civil settlements in Canadian history."

He claimed they assured the companies did not benefit financially from the smuggling. . . .

the companies exported Canadian brand cigarettes into the U.S. in the early 1990s knowing they would be smuggled back into Canada and rigged the coded packages to make it difficult to trace.

Imperial spokeswoman Catherine Doyle said she had no idea how much money Imperial earned selling cigarettes into the contraband market.

"The $200-million fine is substantial and all parties felt that that was a justifiable amount," Doyle said.

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