Imperial Tobacco suspends seven over allegations of smuggling

Imperial Tobacco yesterday suspended seven employees, including one director, who are under investigation by the German customs authorities for allegedly masterminding a smuggling operation at the company's Reemtsma subsidiary.

The group, which acquired the German cigarette manufacturer last year, said Manfred Haussler, the sales and marketing director, would step down from its board while the investigation was completed. All seven employees will continue to receive their full pay packets, Imperial said.

Hundreds of German police and customs agents raided Reemtsma's Hamburg offices in January, seizing three van-loads of documents, after a tip-off that staff had been channelling cigarettes onto the black market and smuggling them back into Germany. The alleged violations, which include breaching the United Nations trade embargo on Iraq, occurred before Imperial acquired Reemtsma for £3.6bn in May 2002.

A spokesman for the group said it had decided to suspend the employees after being advised that the investigation would last "four to five years". One of the problems the board has to face is struggling through vast quantities of information in German, which all needs translating and summarising, he added.

Imperial stressed that "no new allegations have been brought and no charges have been made in connection with the investigation".

The group, which added the West and Davidoff brands to the likes of Lambert & Butler when it bought the company from Tchibo, said Ludger Staby, Tchibo's former chief executive, had also resigned from its board. Mr Staby, who headed Reemtsma until 1998, joined Imperial's board as a non-executive director after the acquisition. He is not part of the smuggling investigation.

Derek Bonham, Imperial's chairman, said the seven employees would receive the company's "full support" during the investigation. He said the decision to suspend them had been taken "as a matter of good corporate governance procedure".

Imperial has established an independent board committee, chaired by its senior non-executive director, Anthony Alexander, to look into the allegations. It is being assisted by a separate steering group of senior executives.

The company, which has come under fire for allegedly turning a blind eye to cigarette smuggling into the UK, said both its trading performance and Reemtsma's integration would be unaffected by the developments.

It said Bruce Davidson, its international managing director, would take charge of all sales and marketing operations outside the UK. The spokesman said no decision had been taken on whether to replace Mr Staby. Imperial's shares slipped 23p to 1,020p.