Reynolds brands lawsuit 'absurd'

The European Commission has accused one of the biggest tobacco groups in the US of money laundering and is seeking "hundreds of millions of euros" in compensation for lost taxes.

The commission, backed by 10 European Union countries, is claiming that RJ Reynolds failed to prevent criminals from laundering money made from illegal drugs and weapons trafficking by buying cigarettes. Other tobacco groups are also expected to be named, EU officials said.

RJ Reynolds, known for its Camel and Winston cigarettes, dismissed the allegations, filed yesterday in a New York court, as "absurd".

The suit is the second in two years filed against the US company. A case brought last year against RJ Reynolds, Philip Morris and Japan Tobacco ­ also seeking compensation for lost taxes ­ was rejected by US courts on the grounds that the commission lacked jurisdiction in foreign tax issues. This prompted it to pursue related money-laundering charges.

"The purpose of this new claim is to obtain injunctive relief to stop the laundering of the proceeds of illegal activities and to seek compensation for the losses sustained," the commission said.

Brussels reckons cigarette smuggling is the single biggest fraud committed against the EU. It cost the commission about €90bn in lost tax revenue in 2000.

RJ Reynolds said. "Any allegations that we were involved in, or aware of, money laundering, conspiracy or any other illegal activities are completely absurd."

Sources in the commission said their proof against the US group came from "shipping papers, witness statements and customs documents".