REMARKS BY

THE HONOURABLE ANNE MCLELLAN
MINISTER OF JUSTICE AND
ATTORNEY GENERAL OF CANADA

AT

A NEWS CONFERENCE ON
TOBACCO LITIGATION

December 21, 1999
Ottawa

Check against delivery

Thank you for joining us this morning.

With me, are the Minister of National Revenue and Secretary of State, the Honourable Martin Cauchon and the Minister of Health, the Honourable Allan Rock.

Today we are announcing that the Government of Canada has filed a lawsuit under the Racketeer Influenced and Corrupt Organisations Act (otherwise known as RICO) in the United States Federal Court, in Syracuse, New York.

The Government of Canada intends to prove that various RJ Reynolds Tobacco Companies and others defrauded the Canadian people by conspiring to smuggle tobacco into Canada.

This lawsuit is against RJR Macdonald Canada and RJ Reynolds Tobacco Holdings inc., several related companies in the U.S. and the Canadian Tobacco Manufacturers Council.

You will recall that the government, to protect Canadian youth from the hazards of smoking, doubled tobacco taxes and duties in February 1991, as part of a national strategy to reduce tobacco use. These increases were designed to act as a deterrent to young people becoming addicted to cigarettes.

However, this policy was frustrated by pervasive tobacco smuggling. In 1994, the problem became so acute that Canada had to take action and the government was forced to significantly reduce its taxes and duties on tobacco.

This resulted in the contraband market being reduced considerably. However, the opportunity of using price to deter young people from starting to smoke also disappeared.

The Government of Canada alleges in the lawsuit that the RJR related companies used an elaborate network of smugglers and off-shore shell companies to ensure an abundant supply of cheap cigarettes to the Canadian market. In so doing they undermined our policy of cutting tobacco usage.

The defendant's goal of making money conflicted with Canada's goal of protecting young people from smoking. So they set out to undermine Canada's policy.

This action is being filed in the United States because, much of the alleged illegal activity took place there, many of the defendants involved in this case are U.S.-based, and many of the witnesses and documentation relating to the case are there.

Through this action, the Government of Canada is seeking the following:

• to restrain the defendants and their co-conspirators from engaging further in smuggling and other unlawful conduct;
• to compel the defendants to surrender the profits of their unlawful conduct; and
• to recover substantial damages suffered by Canada.

The Government has engaged Mr. Fred Bartlit to represent Canada's interests before the United States Federal Court. Mr.. Bartlit is with the highly respected law firm of Bartlit Beck and is working very closely with lawyers from the Canadian Department of Justice. He will be available to answer your questions after our statements.

I would like to ask my colleague, the Minister of Health, to provide you with further information regarding our decision to launch this suit.