BAT defies court over 'confidential' files

Tobacco giant British American Tobacco, owner of Lucky Strike and Dunhill cigarettes, is in a bitter battle with the US Department of Justice over whether it should hand over confidential documents.

A judge ordered last Monday that BatCo, a US subsidiary of the FTSE 100 group, be fined $25,000 (£14,800) for every day it fails to hand over the documents; the total fine is now $125,000. The DoJ believe the documents, held by BAT's Australian subsidiary, might show the company had hidden the health risks associated with tobacco.

But BAT claims the documents are privileged and refuses to hand them over. A spokeswoman said: "They are privileged and confidential documents and we want to protect them." She declined to discuss what they contained but added: "BatCo definitely doesn't agree with the ruling and thinks it's flawed and erroneous. It is exploring all possibilities for appeal and BAT Australia is to instruct its lawyers to intervene."

BatCo intends to ask the judge to allow its lawyers to review the documents instead of handing them over to the DoJ. If that is not acceptable - and it is understood the DoJ will fight the suggestion - the case will go to the appeal court. BatCo will ask for the fines to be suspended while it appeals.

The DoJ is investigating the tobacco industry over fraud and racketeering claims. BAT's involvement stems from a lawsuit filed against its Australian subsidiary in 2001 by Rolah McCabe, who has since died of lung cancer. It lost and was ordered to pay A$700,000 (£250,000) in compensation, although the decision was overturned on appeal. However, during the trial it emerged BAT had shredded documents that were "were likely to be of importance" in litigation.

The tobacco industry is under increasing pressure in the US as smokers seek compensation for smoking-related illnesses. Companies have been accused of withholding information on the serious-ness of the health risk from tobacco, while individual states have sought compensation to help pay for the care of terminally ill smokers.

The industry and the US authorities are locked in a cycle of lawsuits and appeals. The word's largest tobacco company, Philip Morris, was in March ordered to pay $10.1bn in damages in a class-action suit after it was found to have deceived smokers into believing light cigarettes were less dangerous than regular ones. It is had lodged an appeal against the decision with the Illinois Supreme Court.

The only UK court case is that of Margaret McTear, who is suing Imperial Tobacco in Scotland for up to £500,000 on behalf of her husband, who died in 1993 of lung cancer.

* The Turkish government was this weekend mulling over bids for the state-owned Tekel tobacco company. BAT is one of seven interested parties; others include Imperial Tobacco and Altria, owner of Philip Morris and the front-runner to take control.

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