LAWSUIT LINKS SALES TO TOP BRASS

Court claim alleges tobacco company made millions from smuggling trade

OTTAWA - Edward Lang was proud of his senior sales manager.

Such was the pride in the hard-working Leslie Thompson that RJR-Macdonald
brass liked to refer to him as their ``Indian Trader.''

When Thompson left RJR-Macdonald's Toronto office for a job in North
Carolina at Northern Brands International (NBI) - an alleged shell company
set up by the tobacco giant - his proud co-workers presented him with an
Indian headdress at a going away party in Oakville.

It was a tribute to Thompson's acumen in the black market sale of cigarettes
funnelled through the Akwesasne Indian Reserve at Cornwall, a community
which straddles the Canada-U.S. border and through which flowed most of the
cigarettes illegally smuggled into this country.

Today, Thompson is serving a seven-year sentence for his role in smuggling.

He is expected to be a key witness against his former employer in the $1
billion (U.S.) lawsuit filed yesterday by the federal government in a
Syracuse, N.Y., court.

The complaint for damages filed by Ottawa contains allegations that have not
been proven in court.

It alleges RJR fraudulently smuggled cigarettes into Canada, ultimately
forcing Ottawa to roll back tax increases that had been imposed to deter
young smokers.

Thompson was arrested in February. The company claims he had acted on his
own without the knowledge of upper brass.

Documents allege Lang, the CEO of RJR-Macdonald and vice-president of RJR
International, demanded a scheme be put into place to sell more cigarettes.

It is also alleged that Lang had first-hand knowledge of the RJR scam and
oversaw the operation from his office at First Canadian Place.

The documents allege he had a dummy office set up in the building across
from the downtown Toronto corporate headquarters for senior management to
use when they made calls to smugglers or dealt with any smuggling
transactions.

In fact, when Lang was transferred to the United States in 1994, the
documents charge staff gathered at the Four Seasons Hotel in Toronto, where
they presented him with an ``Akwesasne Order of Canada,'' mocking the Order
of Canada presented to persons who have distinguished themselves in the
public service.

In 1992, Lang, according to the government documents, directed two officials
of his company, Thompson and regional field manager Wade Blonheim, to meet
at the Como Restaurant in Niagara Falls, N.Y., with three men known as Larry
Miller, Robert Tavano and Lewis Tavano.

That trio, under the name LBL, informed the RJR executives that they were in
the business of buying Canadian tobacco, selling it to natives in northern
New York, then having it sold back in Canada, without applicable taxes and
duties, Ottawa alleges.

By mid-1992, it says, LBL was one of five companies which bought tobacco
from RJR-Macdonald with the intent of having it smuggled back into Canada.

These smuggling companies were regularly brought to RJR's production
facilities in Montreal, were wined and dined by executives and praised for
the increase in the company's market share in the competitive Canadian
cigarette market.

In March, 1993, senior officials of RJR International met in Winston-Salem,
N.C., to be briefed on the establishment of Northern Brands International
(NBI).

It was essentially a shell company to insulate RJR from dealing directly
with smugglers, the court documents allege.

In NBI's first year of operation, 1993, things were going so well, it had
produced about $60 million of the $100 million profit earned by
RJR-Macdonald.

At one point during the year, NBI was making about $1.5 million per week,
prompting Lang to brag that its three-person operation was making more money
than Ford Canada, according to the court documents. In February, 1994, at a
meeting in Montreal, a proud Lang made a presentation to the company board.

Included in his presentation was a map of Canada and the U.S., marking
Akwesasne with teepees and dollar signs.

Shortly after that, Lang retired, and now lives in Florida.

Eventually, some 21 persons, including NBI customers, were indicted for
smuggling in New York state in 1997.

Shortly thereafter, RJR International moved most of its senior management
from Toronto to Geneva, Switzerland.

Thompson was the most senior executive to have been charged.