Reynolds American to Face Suit on Money Laundering Claims

Reynolds American Inc. (RAI), maker of Camel cigarettes, can be sued by the European Union on claims the tobacco company orchestrated a worldwide scheme to launder drug money, a federal appeals court ruled in reviving a suit filed more than a decade ago.

The EU can use U.S. racketeering law to sue Reynolds American, a three-judge panel of the court in Manhattan ruled today, reversing a lower-court judge’s decision to dismiss the suit. The lawsuit was originally filed by the European Community, which was legally replaced by the EU in 2009.

Reynolds American is considering additional appeals and will again ask the federal court to dismiss the case for other reasons, Bryan Hatchell, a spokesman for the tobacco company, said in an e-mailed statement.

The EC claims Reynolds American directed a scheme in which Colombian and Russian criminal organizations laundered drug profits through European money brokers. The brokers sold discounted euros obtained from the drug sales to cigarette importers, who then purchased Reynolds American cigarettes from wholesalers, according to the complaint.

U.S. District Judge Nicholas Garaufis dismissed the EC complaint in 2011 calling it a “structureless morass of allegations, devoid of any sequential description of events.” Garaufis dismissed the claims because the alleged money laundering took place outside the U.S. He also ruled that the EC’s presence in the suit deprived the court of jurisdiction.

The EC, which was later incorporated into the European Union, first sued Reynolds American and other tobacco companies in 2000, in a series of related cases that were litigated as far as the U.S. Supreme Court.

The case is European Community v. RJR Nabisco, 11-02475, Second U.S. Circuit Court of Appeals (Manhattan).

To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Joe Schneider, Stephen Farr

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