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US court revives European suit vs. R.J. Reynolds

Wednesday - 4/23/2014, 5:20pm  ET

LARRY NEUMEISTER
Associated Press

NEW YORK (AP) -- A federal appeals court on Wednesday reinstated the European Union's 12-year-old lawsuit claiming that tobacco company R.J. Reynolds sponsored cigarette smuggling in Europe and orchestrated a global money laundering scheme with organized crime groups.

The 2nd U.S. Circuit Court of Appeals in Manhattan said a lower court judge erred in tossing out the lawsuit brought by the European Union and 26 of its member states.

The judge had concluded the European Community, which has been incorporated into the European Union since the lawsuit was filed in 2002, did not qualify as an organ of a foreign state and that racketeering laws did not apply outside the United States. But the appeals court said the plaintiffs were within rights to sue in U.S. courts because Congress has made clear it intends federal racketeering laws to sometimes be applicable to crimes committed outside the United States.

"Congress unmistakably intended that they apply extraterritorially," 2nd Circuit Judge Pierre N. Leval wrote. The three-judge panel also concluded that the European Union, formed by its member nations to serve on their collective behalf, can properly be described as an organ of each nation.

Reynolds American Inc., based in Winston-Salem, N.C., said through spokesman Bryan Hatchell that it is considering additional appeals of the lawsuit.

"Several alternative grounds for dismissing the case exist, and we will ask the district court to dismiss the case again on those grounds," he said. "We continue to believe that the lawsuit is entirely baseless in both fact and law."

The lawsuit alleges RJR directed, managed and controlled a global money-laundering scheme with Colombian and Russian criminal organizations. It said the company laundered money through New York-based financial institutions and sent RJR executives and employees to Europe, the Caribbean and Central America to further money-laundering arrangements.

At times, it said, RJR's employees took monthly trips from the United States to Colombia through Venezuela, bribed border guards to enter Colombia illegally, received payments for cigarettes and traveled back to Venezuela before sending funds to RJR's accounts in the United States.

The lawsuit claimed multiple violations of racketeering laws, including mail fraud, wire fraud, money laundering, violations of the Travel Act and laws banning material support to foreign terrorist organizations.

It said the money laundering scheme also affected organized crime and narcotics trafficking in New York with much of the money laundering occurring through cigarette sales in New York City, with millions of dollars' worth of real estate having been purchased in New York as a result of the scheme.

The appeals court returned the case to Brooklyn federal court, where Judge Nicholas Garaufis had dismissed the lawsuit.


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