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Statement: R.J. Reynolds Affiliate Pleading Guilty to Cigarette Smuggling Operation

Statement by Bill Novelli/President And Matthew L. Myers/Executive Vice President and General Counsel of the CAMPAIGN FOR TOBACCO-FREE KIDS

Washington, DC - Since the early 1990s, the tobacco industry has argued that the black market in tobacco products between Canada and the U.S. was caused by the Canadian government’s tobacco pricing policies. Now we have evidence that proves otherwise.

Today, the R.J. Reynolds Tobacco International, Inc.’s Northern Brands International, Inc. affiliate pleaded guilty to aiding and abetting customers who evaded more than $2.5 million in U.S. excise taxes by fraudulently transporting within the U.S. cigarettes that were intended to be exported. Northern Brands has agreed to pay a total of $15 million in criminal fines and forfeitures; the illegal activity took place between August 1994 and June 1995.

It has long been suspected that the tobacco industry itself was behind the burgeoning black market in tobacco products in the U.S., as well as actively engaged in these illegal smuggling practices. Today’s guilty plea is proof that these suspicions were correct and well-founded.

At his now infamous April 8, 1998 speech before the National Press Club in Washington, R.J. Reynolds Chairman and Chief Executive Officer Steven F. Goldstone declared war on Senator John McCain’s (R-AZ) proposed tobacco control legislation, the U.S. Congress, and the Clinton Administration. Mr. Goldstone claimed that the McCain bill would “create a black market overnight” for tobacco products, and volunteered that 695,000 packs of cigarettes -- or 14 million individual cigarettes -- would fit into one trailer truck.

It is interesting to note that Reynolds executives know the exact cigarette capacity of trailer trucks.