Reynolds appeals to Supreme Court in RICO case

Source from:  Winston-Salem (NC) Journal 08/06/2015

R.J. Reynolds Tobacco Co. is appealing to the U.S. Supreme Court in its attempt to halt a European Union lawsuit against RJR Nabisco Inc., affiliates and successors that was dismissed in May 2011, but later reinstated.

The lawsuit, initially filed in October 2002, alleges Reynolds directed, managed and controlled a decade-long global money-laundering scheme with Colombian and Russian criminal organizations.

The key element with U.S. legal implications is accusations of Reynolds and subsidiaries violating the Racketeer Influenced and Corrupt Organizations (RICO) Act of 1970. RICO refers to the prosecution and defense of individuals who engage in organized crime.

The case was heard by the U.S. Court of Appeals for the Second Circuit in New York. In April 2014, a three-member panel ruled the EU and 26 member countries were within their rights to sue in U.S. courts. In April 2015, the court's full membership voted 8-5 to allow the lawsuit to proceed.

Reynolds' appeal is a writ of certiorari, which is a kind of judicial review. Typically, a conference is held by the justices to decide whether to grant the petition. At least four justices have to agree to hear the case for it to move forward.

Reynolds said the case should be heard in part because of the increasing frequency of RICO cases, and to address the fact that several states have created their own RICO statues.

Reynolds argues the appeals court decision "opens the door to a type of civil litigation that will adversely affect important American interests" in a way Congress did not authorize.

"The panel decision invites our court to adjudicate civil RICO claims grounded on extraterritorial activities anywhere in the world. Its rules authorize plaintiffs to sue for ‘overseas' conduct by a ‘foreign enterprise' even when nobody in the U.S. has suffered an injury.

"In short, resolution to the question of RICO's extraterritorial reach is absolutely vital to American interests ... and this is a good vehicle" for addressing it since "the extreme facts of this case make it an ideal vehicle for appreciating the consequences of the Second Circuit's rule."

Authorities allege the money laundering scheme worked this way: Illegal drugs were sold, producing revenue in euros. Money brokers exchanged the euros for the domestic currency of the criminal organizations' home countries.

The money brokers sold the euros to cigarette importers at a discount rate, who in turn used the euros to buy Reynolds-branded cigarettes from wholesalers.

The plaintiffs alleged Reynolds "gave special handling instructions ‘intended to conceal the true purchaser of the cigarettes.'"

The plaintiffs, in a complaint amendment, later accused Reynolds management of buying Brown & Williamson Tobacco Corp. for $4.4 billion in July 2004 "for the purpose of expanding upon their illegal cigarette sales and money-laundering activities."

The lawsuit said Reynolds laundered money through New York-based financial institutions and sent its executives and employees to Europe, the Caribbean and Central America to further money-laundering arrangements.

The EU and the 26 member countries said they were deprived of tax revenue. The complaint did not list a specific amount of compensatory, restitutionary and punitive damages.

The appeals court returned the case to Brooklyn federal court, where Judge Nicholas Garaufis dismissed the lawsuit in May 2011, citing lack of subject matter jurisdiction, particularly the inclusion of the EU as a foreign state.

The plaintiffs filed their appeal in February 2012. The majority of the appeals court judges reaffirmed that RICO statutes are applicable in the case. Enditem