Imperial Tobacco Canada

Court rules Ontario must wait for payment in tobacco case

The Ontario government will have to wait for its share of a $350-million settlement reached in 2008 with Imperial Tobacco Canada Ltd. after the cigarette maker admitted it had participated in smuggling tobacco into Canada across the U.S. border.

The Ontario Court of Appeal ruled this week that Imperial Tobacco can defer payments it owes to Ontario and instead put the money into an escrow account while an arbitrator decides on a dispute over the payments.

The case stems from a deal approved in July, 2008, when two of Canada’s biggest tobacco companies agreed to pay $1.15-billion in criminal and civil penalties for co-ordinating the shipment of cigarettes to the United States in the 1980s and 1990s that were then smuggled back into Canada and resold at discount prices to avoid Canadian taxes on tobacco.

Imperial Tobacco agreed to pay a $200-million fine in the case and also agreed to pay $350-million in civil penalties to the federal government and the governments of Ontario and Quebec in exchange for a release from future legal actions.

After the deal was approved, Imperial Tobacco was hit with a separate $50-million class-action lawsuit filed by the Ontario Flue-Cured Tobacco Growers’ Marketing Board on behalf of all growers and producers in the province who were required to sell their tobacco through the marketing board. The growers claimed they were underpaid for their tobacco because of the smuggling scheme.

Imperial Tobacco notified the Ontario government that it would withhold the payments it was supposed to pay the province in annual instalments over 15 years -- up to a maximum of $50-million -- and put the money into an escrow account pending the resolution of the growers’ lawsuit. The tobacco company is still making required payments to the federal government and Quebec, however.

It claimed any payments that might result from the lawsuit should reduce the penalty it owes to the Ontario government because the settlement agreement included a pledge that the governments would not pursue further legal action, and any claim that is brought would reduce the promised payments.

Imperial Tobacco alleged the Tobacco Growers’ Marketing Board is an entity connected to the Ontario government. The province has disputed that claim, and says Imperial Tobacco should not be allowed to withhold its required payments because of the other lawsuit.

Imperial Tobacco won approval from the Ontario Superior Court last year to have an arbitrator determine the matter -- an option permitted under the terms of the original 2008 settlement agreement.

Imperial Tobacco Canada Sues First Nations Tobacco Manufacturers ...

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Parts of nacsonline.com are not functioning correctly due to a power outage at one of our facilities. This includes site login, directories, and some other features. Our support staff are working on the issue and we appreciate your understanding and patience. Please contact webmaster@nacsonline.com with any questions or concerns. The company also seeks to have smaller tobacco manufacturers included as third parties to the case that the Ontario government has already filed against the big tobacco companies, including Imperial, for tobacco-related, health-care costs. If the government’s case is found truthful, then any tobacco business — including those on First Nation reservations in Ontario — should be subject to the same lawsuit, said Gagnon. The government’s lawsuit ignores the question of contraband cigarettes and it left out the First Nations’ tobacco businesses. Imperial targeted 18 tobacco manufacturers on reservations. The company’s lawsuit contends that tobacco products are sold illegally on reservations. “They're selling to kids, they're selling without collecting taxes, they're not respecting the display and labeling regulations,” said Gagnon. “Since government doesn't want to take the responsibility, we've decided to move forward.

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