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U.S. House Judiciary Committee Passes Bill that Protects Cigarette Smugglers

July 20, 2006

Washington, DC — The U.S. House Judiciary Committee this afternoon approved special interest legislation that would shield U.S. tobacco companies from legal accountability if they aid and abet cigarette smuggling, which often is used to fund criminal and terrorist enterprises around the world. The full House of Representatives should defeat this legislation when it comes to the floor for a vote.

The legislation, H.R. 5535, would prohibit foreign governments from suing an American company in U.S. courts under the civil provisions of the Racketeer-Influenced and Corrupt Organizations (RICO) law. This prohibition would apply even if the American company knowingly participated in or abetted smuggling or money laundering in the country seeking to sue. Several countries are considering filing such RICO suits to hold U.S. tobacco companies legally accountable for their alleged involvement in cigarette smuggling.

Countries including Canada, Colombia and several European Community countries have alleged that U.S. tobacco companies have played a major, documented role in fostering cigarette smuggling, which has undermined policies to reduce smoking, cost governments billions in tax revenue and helped fund and launder money for terrorists, drug traffickers and other criminal enterprises around the world.

While the Judiciary Committee did pass an amendment allowing lawsuits in cases of conduct that provides funding to a terrorist organization, the legislation would still block foreign governments from filing other lawsuits related to cigarette smuggling, even if the smuggling was used to fund other criminal enterprises.

Tobacco companies are already provided more than adequate protection against lawsuits by foreign governments in our courts. U.S. courts have dismissed previous lawsuits filed by countries to recover billions of dollars in tax revenue lost because of cigarette smuggling. The courts found that these lawsuits violated a legal doctrine known as the 'revenue rule,' which the courts interpreted as barring suits by foreign governments seeking to collect unpaid taxes even if the U.S. companies involved acted illegally. These decisions have spurred countries to look at the civil RICO law as another way to hold tobacco companies accountable.

'It appears to us that H.R. 5535 is special interest legislation designed to protect the tobacco industry from the legitimate efforts of foreign governments to protect themselves from tobacco companies that aid, abet and foster illegal smuggling, criminals and terrorists. There is no reason why Congress should protect any tobacco company that engages in cigarette smuggling,' the Campaign for Tobacco-Free Kids wrote in a letter to House Judiciary Committee members.