Here is a more in-depth look at Colombia v. Phillip Morris, civil RICO case. AUG00ALERT >From the August 2000 issue of Money Laundering Alert Colombian states say Philip Morris led laundering, smuggling enterprise The U.S. money laundering law in the criminal arena is the most powerful in the world. What is not so well known to many lawyers and litigants is how strong a weapon the money laundering law can be in purely civil cases where the U.S. government is not even a party. A civil lawsuit filed in the Brooklyn federal district court in May by the Republic of Colombia�s 22 provinces and capital district against the world�s largest tobacco company, Philip Morris and five related companies, may teach some lessons and take the remedial qualities of the money laundering law to new limits - if it overcomes the obstacles the tobacco giant will surely place in its path. Laundering serves as a basis for RICO suit The bluntly written complaint, based on the civil provision of the Racketeer Influenced and Corrupt Organizations Act (Title 18, USC Secs. 1961-4), seeks billions of dollars in damages, and injunctive relief. It is uncommon for the great detail it recites, which derives either from extensive prior investigation or assistance from insiders at Philip Morris. The RICO Act permits person "injured in their business or property" to sue for treble damages and to use specified crimes, such as money laundering, as predicates for the suit. Blunt, damning allegations The complaint must rank as one of the most damning federal court documents ever filed against a Fortune 500 company. In 74 pages, it accuses Philip Morris of leading a long-standing conspiracy whose purpose was to smuggle billions of cigarettes into Colombia to evade payment of billions of dollars in customs duties and and other levies to which legitimately imported cigarettes are subject. It names several Philip Morris officials who allegedly met with co-conspirators in New York, Belgium, Colombia, Ecuador, Holland, Panama, Switzerland and Venezuela, where smuggling, price-fixing and other illegal activity were discussed. Philip Morris is accused of maintaining and nourishing a clandestine worldwide network of European, South American and U.S. accomplices, including currency exchange houses that deal with drug traffickers� money. The suit alleges that the highest levels of Philip Morris executives conceived, designed and implemented the smuggling scheme to maximize sales and profits. The alleged money laundering The suit says executives created a maze of third-party payment mechanisms and Swiss bank accounts to hide and disguise the smuggling scheme and to shield the smugglers from government scrutiny.The company allegedly maintained relations with drug dealers and currency dealers to facilitate the smuggling and the money laundering. The suit also accuses Philip Morris of: * Shipping cigarettes designated for one port knowing they would be diverted to another port for smuggling. * Creating false shipping documents and presenting them to the U.S. Customs Service. To disguise its role in the conspiracy the tobacco giant allegedly routed cigarettes through European firms that knowingly supplied the smugglers. For the smugglers it is such a lucrative business that they even used anti-tank weapons to remove Colombian anti-smuggling installations, the suit says. Alleged involvement with drug traffickers The suit alleges that Philip Morris employees "were personally involved in the laundering" of drug proceeds. Various company employees allegedly traveled to Colombia, entering illegally and paying bribes to assure that their passports did not reflect travel to Colombia. These employees allegedly directly or indirectly received large volumes of cash in payment of the smuggled cigarettes, which was smuggled out of Colombia into Venezuela and deposited into accounts for the benefit of Philip Morris. Lawyers The complaint, which had not yet been served on Philip Morris in late July, was filed by Speiser, Krause, Nolan & Granito, a New York law firm. John H. Halloran, Jr., one of its lawyers, would not comment. Michael York, a lawyer at New York�s Wehner & York, which represents Phillip Morris, said: "I absolutely believe we will prevail. The company has acted lawfully.... The allegations don't have any factual or legal merit.'' (Case No.CV 00 2881, E. Dis. N.Y.) Is there fire from this smoke? Some facts about cigarette smuggling and money laundering * An R.J. Reynolds Tobacco Co. affiliate pleaded guilty in January 1999 to aiding a $687 million money laundering and smuggling operation into Canada that sought to evade U.S. excise taxes. Northern Brands International, Inc., paid a $5 million criminal fine and a $10 million civil penalty. Fifteen of 18 indicted persons were convicted (MLA, Jan. 1999). * Last December, R.J. Reynolds was sued in federal court in Syracuse, N.Y., by the Canadian government which alleges that the smuggling undermined efforts to discourage smoking through higher taxes. * In January, two non-profit entities, Action on Smoking and Health, of the U.K., and Center for Public Integrity, of the U.S., released records suggesting that British American Tobacco Corp. encouraged smuggling to boost sales in Latin America and Asia. * Raymond W. Kelly, U.S. Customs Commissioner, last March, told a U.S. Senate panel that "international cigarette smuggling has grown to a multi-billion-dollar-a-year illegal enterprise linked to transnational organized crime...." * Fanny Kertzman, Colombia's director general for taxes and customs, in June 1999, told a U.S. Senate panel that 90% of the cigarettes brought into Colombia were contraband. For assistance in utilizing Money Laundering Alert On-line, please send an E-mail to Alert Global Media by clicking here.
