Reynolds American to Face Suit on Money Laundering Claims

Reynolds American Inc., maker of Camel cigarettes, can be sued by the European Union over claims it orchestrated a worldwide scheme to launder drug money, a federal appeals court ruled in reviving a lawsuit 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, 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.

“It is an important step forward for the EU in its quest to combat illicit the tobacco trade, and protect its citizens and its financial interests,” Algirdas Semeta, the EU’s anti-fraud commissioner, said in an e-mailed statement today.

The EU 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.

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 yesterday in an e-mailed statement. John Halloran Jr., a lawyer for the EU, didn’t immediately respond to a voice-mail message yesterday after regular business hours seeking comment on the ruling.

‘Structureless Morass’

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

The EC first sued Reynolds American and other tobacco companies in 2000, in several cases that were litigated as far as the U.S. Supreme Court.

Among the nations suing Reynolds American are Germany, Spain, Poland, Sweden, Greece and Bulgaria.

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