The Caribbean cigarette smugglers were unhappy with their suppliers and sent a message to the tobacco giant R.J. Reynolds demanding that the cigarettes should be packaged differently. The cartons used for cigarettes to be sold in supermarkets were too flimsy for transport in ships to South America and Europe, the smugglers explained.
The tobacco company responded swiftly and from then on, cigarettes were shipped from New York Harbour to the Caribbean in sturdier, cardboard packages.
This, at least, is one of the allegations made by the European Commission in a lawsuit against R.J. Reynolds and Philip Morris, makers of Marlboro cigarettes, accusing the firms of deliberately encouraging tobacco smuggling in order to secure their market share. In a statement of claims, a copy of which has been posted on the Internet by a German news magazine, the Commission accuses the companies of dealing with organised criminals and allowing Colombian drug lords to launder their profits through the tobacco trade.
A Commission spokeswoman confirmed yesterday that the document on Der Spiegel's website was genuine but declined to make any further comment on the lawsuit, which was lodged 10 days ago in a New York court. The tobacco companies deny the allegations but a spokeswoman for Philip Morris at Lausanne in Switzerland said yesterday that she had not yet seen the specific charges.
The 188-page statement of claims makes colourful reading and in some places, it resembles a crime thriller rather than a legal document. If the New York court agrees to consider the lawsuit, it could cost the cigarette manufacturers hundreds of millions of pounds - to say nothing of the embarrassment of being associated with drug dealers.
If the tobacco firms had simply turned a blind eye to the profitable business of cigarette smuggling, they would have little to fear from the courts. But the Commission alleges that they went much further, encouraging and even orchestrating the smuggling by producing false documents, opening secret transport routes and clandestine payment systems.
To keep the smuggling business going, the companies worked knowingly, according to the Commission, with drug barons who used the cigarette trade to launder profits from heroin, cocaine and cannabis. The document details a succession of shipments from Morocco to Spain which it claims were organised with the knowledge of the tobacco companies.
The Commission's lawyers claim that an investigation into the internal communications of the tobacco firms would show that some customers were clearly buying cigarettes to be sold on the black market. Cigarette packets were dispatched with phoney tax stamps to maximise their chance of being sold.
The Commission has documented cases where the tobacco giants destroyed compromising documents relating to the smuggling in an attempt to conceal their involvement.
"In the 1990s, the Philip Morris defendants destroyed documents relating to its so-called `tax-free customers' and thereby concealed PM's direct involvement in and promotion of smuggling activities," the statement of claims says.
The EU lawyers also claim that, besides fixing prices for legal sales of cigarettes, the tobacco companies agreed on a "fair price" for smuggled goods.
Cigarette smuggling is undoubtedly a profitable business, not least because of the enormous excise duties levied by EU countries. The producers sell a packet of cigarettes for about 25p but tax brings the price for most European smokers well above £2. Even if the cigarettes are sold for just £1 a packet on the black market, the profit margin is significant. Philip Morris produced 945 billion cigarettes in 1998, recording a profit of more than $10 billion. R.J. Reynolds produced just 300 billion cigarettes that year, netting $2 billion.
The EU argues that some of those profits belong to European taxpayers, who are the ultimate victims of cigarette smuggling. "We want our money back," declared Ms Michaele Schreyer, the EU Budget Commissioner and a former German Green politician.
Although the hundreds of millions of pounds the EU stands to recover if it wins the action would undoubtedly plug a few holes in Ms Schreyer's budget, the case against the tobacco giants could provide an even bigger boost to Brussels. At a time when politicians are queuing up to blame the EU for unpopular measures agreed by the member-states, the case against big tobacco is evidence that - sometimes, if not always - the Commission's thinking is in tune with that of most European citizens.
