FOR IMMEDIATE RELEASE
TUESDAY, DECEMBER 22, 1998
SYRACUSE, NEW YORK An affiliate of R.J. Reynolds Tobacco International Inc.-- Northern Brands International Inc.-- pleaded guilty today and agreed to pay a total of $15 million in criminal fines and forfeitures for aiding and abetting customers who evaded more than $2.5 million in U.S. excise taxes by fraudulently transporting within the United States cigarettes that were intended to be exported, announced United States Attorney Thomas J. Maroney of the Northern District of New York and Treasury Under Secretary for Enforcement James E. Johnson.
"Today's guilty plea may be the first time an affiliate of a major tobacco company has been convicted of a federal crime in the United States," said U.S. Attorney Maroney.
The guilty plea is the result of an ongoing four-year investigation into a massive scheme to defraud the U.S. and Canadian governments of tax revenues by smuggling tobacco and liquor products from the U.S. into Canada through the St. Regis Mohawk Indian Reservation (Akwesasne) in Northern New York. To date, the investigation has resulted in more than 20 individual felony convictions.
"We will not tolerate anyone using the New York border or any other border in the U.S. as a thoroughfare for conducting illegal smuggling operations," said U.S. Attorney Maroney.
"Through the tremendous cooperative efforts by Treasury and Justice law enforcement and prosecutors, we have been able to dismantle a large scale system of illegal tobacco diversion," said Treasury Under Secretary Johnson.
Northern Brands, which is headquartered in Winston-Salem, North Carolina, is charged with fraudulently moving 26 loads of Canadian cigarettes by representing to the U.S. Customs Service that the merchandise would be transported in the U.S. solely for exportation to the Republic of Estonia or the Republic of Russia. In fact, the merchandise was diverted into the United States to be sold. The illegal operation took place from August 1994 to June 1995, the government charged.
The felony criminal information and plea agreement were filed in U.S. District Court in Binghamton, New York. Chief U.S. District Judge Thomas J. McAvoy imposed the $5 million criminal fine and ordered Northern Brands to pay $10 million into the U.S. Treasury Asset Forfeiture Fund, from which it can be disbursed to defray expenses incurred by the law enforcement agencies that participated in the investigation. R.J. Reynolds Tobacco International Inc. also has agreed to take remedial measures to ensure that similar violations do not occur in the future, and to cooperate with law enforcement authorities in related investigations.
Evidence of the underlying criminal activity was developed through the cooperative investigative efforts of the United States Attorney's Office for the Northern District of New York; Internal Revenue Service Criminal Investigation Division and Internal Security Division; U.S. Customs Service; the Bureau of Alcohol, Tobacco & Firearms; Financial Crimes Enforcement Network; the U.S. Border Patrol; the Federal Bureau of Investigation; and the New York State Police.
"The contributions made by dedicated agents and investigators from each of these law enforcement agencies have been essential to the success of this undertaking," said U.S. Attorney Maroney.
This case was prosecuted by Assistant U.S. Attorneys Gregory A. West, Andrew T. Baxter and Stephen C. Green of the U.S. Attorney's Office in the Northern District of New York.
United States Attorney Thomas J. Maroney