Rothmans and Imperial Canada 'Fined' more than $1 billion

Source from:  tr.itsmyiq.com Aug 1, 2008 08/04/2008

Imperial Tobacco Canada and Rothmans, Benson & Hedges (RBH) are to pay more than $1 billion as part of an agreement with Canada's governments in respect of the long-running investigation into illicit cigarette sales. Imperial Tobacco Canada said yesterday it had reached a resolution with the country's federal and all ten provincial governments in respect of the investigation related to the export to the US of Imperial tobacco products during the late 1980s and early 1990s. '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 [$200 million],' the company said in a note posted on its website. 'The company has also entered into a 15-year civil agreement (the Comprehensive Agreement) with the federal and provincial governments.' The agreement requires the payment to the government this year of $50 million and a percentage of Imperial's annual net sales revenue for the next 15 years up to a maximum of $350 million. Imperial said that as part of the civil agreement, it, RBH, the federal government, and the provinces would work together on initiatives to fight the growth of illicit tobacco products, which in 2007 accounted for an estimated 20 per cent of the tobacco market in Canada. Meanwhile, Rothmans Inc said that it had reached an agreement with all of Canada's governments that resolved the RCMP's [Royal Canadian Mounted Police] investigation relating to sales of products exported from Canada by RBH during the period 1989-1996. 'Under the terms of the comprehensive agreement, payments expected to total C$550 million are to be made commencing in 2008 and over the next ten years,' Rothmans said in a note posted on its website. 'As part of the overall resolution, RBH has entered a plea of guilty to a single count of violating a provision of the Excise Act (Canada). 'As previously disclosed, the RCMP investigation related to allegations that some of the tobacco products manufactured and exported by RBH were illegally smuggled back into Canada without payment of applicable excise and tobacco taxes and duties. RBH and Rothmans Inc. have agreed to this overall resolution in order to bring closure to this legal matter and to put an end to the uncertainty and burden on the companies arising from the RCMP's investigation. 'The terms of the settlement require the following payments to be made: • $100 million fine payable by RBH by no later than October 29, 2008; • $50 million towards a new government Contraband Tobacco Enforcement Strategy payable by RBH no later than December 15, 2008; • $200 million payable by Rothmans Inc. over 10 years at a rate of $20 million per year with the first payment to be made by December 31, 2009; • an estimated $200 million payable by RBH, with the first payment of $50 million to be made no later than December 31, 2008 and the remainder scheduled to be paid over a 10-year period based on a formula related to the revenue of RBH set out in the comprehensive agreement.' Enditem