[LINK] "Farmers sue tobacco firms for $150M"

[rfmcdonald]

Back in 2008 I linked to an article describing the drawn-out and painful collapse of Ontario's tobacco belt farms, wrecked by cheaper foreign competition and anti-smoking legislation. According to Tom Blackwell in the Financial Post, the survivors of that industry are suing their buyers, arguing that the cigarette manufacturers' involvement in cigarette smuggling scheme cheated them out of huge amounts of income.

Farmers have filed $150-million in class-action lawsuits, alleging that the firms paid them the lower, export price for tobacco that was initially sent to the United States, but then smuggled back--tax free--for the Canadian market.

[. . .]

In the 1990s, millions of cigarettes from a different source were smuggled into Canada and sold tax free on the black market.

It turned out the industry was deeply involved.

The federal government laid charges in the mid-2000s against the four major tobacco companies, alleging they deliberately "exported" product to the United States, knowing it would be secreted back across the border, and saving billions in taxes.

Imperial, Rothmans, Benson and Hedges settled the case in 2008, paying a total of $300-million in fines after pleading guilty to a violation of the Excise Act.

They also agreed to hand over more than $500-million to resolve civil cases filed by the governments. JTI-Macdonald and R.J. Reynolds reached similar settlements this April.

The farmers' suit stems from the two-price system they worked under until recently.

In 1986, for instance, growers were paid $1.84 per pound for tobacco to be sold domestically, and $1.11 for tobacco used in products destined for export, according to their statement of claim.

As the smuggling operation picked up steam, the percentage of tobacco the companies bought for export soared four-fold from 3% in 1986 to 14% in 1993, the document indicates.

Since the firms knew the tobacco would end up back in Canada, they should have paid growers the domestic price, the suit charges.