The U.S. Supreme Court has agreed to hear a very strange case in which the member states of the European Community, including Germany, France and Sweden, accuse R.J. Reynolds of overseeing a vast conspiracy to launder drug money through the sale of cigarettes.
The issue the Supreme Court has agreed to decide is whether the Racketeer Influenced and Corrupt Organizations Act applies to activities outside the U.S. But more interesting is the underlying lawsuit: In it, these European nations accuse Reynolds of engaging in a breathtaking array of criminal acts including money laundering, bribery and facilitating the sale of illegal drugs.
"The proceeds of enormous amounts of Colombian cocaine money and Russian heroin money derived from narcotics sales in the United States and THE EUROPEAN COMMUNITY, as well as the proceeds of other crimes, were laundered through the purchase and sale of the RJR DEFENDANTS’ products," those nations say in their second amended complaint.
Reynolds, of course, denies the allegations. And U.S. District Judge Nicholas Garaufis, in a 2011 ruling, dismissed the case and called it "a structureless morass of allegations, devoid of any sequential description of events." Yet the Second Circuit Court of Appeals reversed him, ruling that the case should be allowed to proceed because Congress intended RICO to cover conspiracies largely conducted outside the U.S.
The Supreme Court agreed to hear the case yesterday, largely to resolve the conflict between the Second Circuit's decision and its own decision in Morrison v.
The Supreme Court's decision should clarify yet another area where enterprising plaintiff lawyers have tried to use U.S. law and U.S. courts to sue foreign companies, or domestic companies over acts that occur overseas and affect foreign plaintiffs.
The high court chose an odd case to do it, though. Odder still is the involvement of 26 European countries, who are represented by personal-injury and toxic torts attorneys led by the Fort Lauderdale, Fla. firm of Krupnick Campbell and Malone. Lawyers there declined comment.
The lawsuit looks like a classic piece of entrepreneurial lawyering that the Europeans inexplicably signed off on. As Judge Garaufis noted, it doesn't make a lot of sense. According to Germany, France and other presumably sophisticated nations, drug dealers selling Colombian cocaine and Afghan heroin into Europe are desperate to convert their Euro proceeds into Colombian pesos and Afghani afghans. So desperate, these nations say, that they sell their euros at a discount to black market currency brokers who in turn sell those Euros at a discount to cigarette importers controlled by the drug dealers.
There is no explanation of why these currency dealers would sell perfectly fungible Euros at a discount, or why a Colombian drug dealer would store his profits in local currency. Apparently they've never heard of Swiss bank accounts or BVI corporations.
It doesn't matter, because these European nations, with all their intelligence assets, never identify anybody who is actually involved in this scheme other than Reynolds. The complaint makes a lot of conveniently sketchy allegations, such as: Reynolds employees regularly flew to Venezuela and crossed over into Colombia, bribing border guards not to stamp their passports. There they sold cigarettes for cash, brought the money back to Venezuela, and deposited it in banks so it could be wired back to Europe or converted into U.S. denominated Brady bonds.
Possible? Anything's possible. But also conveniently devoid of details that can be proven false at the pleading stage. A typical statement: “This cycle continues until the criminals involved are arrested and a new cycle begins. Money laundering is a series of such events, all connected and never stopping until at least one link in the chain of events is broken.”
The European Community filed this case in 2000 and has pursued it vigorously ever since, although never adding much in detail to its allegations. That's strange, too, since one would think that after a decade of such activity, European criminal authorities would have busted up the scheme and hauled at least one RJ Reynolds executive off to jail. I don't see any news reports suggesting that.
By taking the case, the Supreme Court may be stepping in to shut down one more strategy lawyers, in league with governments, use to try and extract money from corporate defendants and rich fees for themselves. For all I know the allegations are true, but this suit, in its current form, looks more like a vehicle for a hoped-for settlement than a real case. Kudos to Reynolds for fighting it.
