Canadian police search Imperial Tobacco offices

Player's cigarettes is one of Imperial Tobacco's brands.

VANCOUVER - Police have searched the Montreal headquarters of Imperial Tobacco Canada as part of an investigation into cigarette smuggling in the 1990s, the company says.

Imperial, owned by British American Tobacco, said it was co-operating with investigators from the Royal Canadian Mounted Police, although it added that from "a legal standpoint it is not consenting to the search."

Imperial said the search warrant mainly involved documents on its activities between 1989 and 1994. The company markets such cigarette brands as du Maurier, Player's and Matinee.

Officials have been probing allegations that cigarette makers were involved in a wave of smuggling in the early 1990s when the government imposed high taxes on tobacco in provinces including Ontario and Quebec to reduce smoking.

The smuggling largely involved Canadian-made cigarettes that were shipped to the United States, where the taxes were not levied, and then returned to Canada and sold on the black market. It forced the taxes to be rolled back in 1994.

"The company is surprised about suspicions that it was in any way linked to smuggling activities in the early 1990s, because of the extensive collaboration that existed at that time with the RCMP in the investigation of smuggling activities," Imperial said in a statement.

The company said its co-operation included allowing police to use one of its trucks as bait in a sting operation to catch smugglers.

The federal government has already filed a lawsuit against JTI-Macdonald Corp. that alleges the company engaged in smuggling. The company is a unit of Japan Tobacco, although it was owned by RJR-Macdonald Corp. in the early 1990s.

Revenue Quebec has also demanded JTI-Macdonald pay C$1.36 billion ($1.6 billion) in taxes the province says were illegally avoided because of the smuggling, a move that prompted the company to file for court protection from creditors in August.

The RCMP did not issue any statement on the Imperial raid, but CBC radio said the search warrant authorized a three-day search of the offices and investigators were expected to remain at the scene through the weekend.

Canadian cigarette companies have accused both the federal and provincial governments of indirectly supporting smuggling by imposing such high taxes on smoking products they encouraged consumers to use the black market.

- REUTERS