THE European Commission has filed a massive money- laundering suit against RJ Reynolds Tobacco, maker of Camel and Winston cigarettes. The beneficiaries of the laundering allegedly include Saddam Hussein’s son Uday.

The action, the latest in a series of legal moves dating back to 2000, is an attempt by the EU to claw back millions in tax revenues lost to tobacco smuggling. The filing threatens unlimited fines and imprisonment for executives.

In a detailed 148-page submission, the Commission describes almost a dozen schemes through which it alleges the financial proceeds of organised crime are used to buy the company’s cigarettes. These are exported from the US via a complex network of intermediaries and traders to countries as far apart as Switzerland, Montenegro, Cyprus and Panama.

The Commission alleges that some of the transactions involved illegal funds from Italy which were laundered in Switzerland and used to buy the cigarettes. The submission documents the sale of the company’s Winston brand in Iraq in defiance of US sanctions in a trade that boosts the personal fortune of Saddam’s son.

The Commission is using shipping documents, witness statements and customs declarations to try to prove RJ Reynolds received or transported payments for its cigarettes in the knowledge that the money was the proceeds of some form of crime which the perpetrators wished to conceal.

The civil charges were filed in New York by the EU and ten members of the European Union. Michaele Schreyer, EU Budget Commissioner, said: “Protecting the financial interests of the European Community and fighting against money-laundering and fraud remains a top priority for the European Commission. The Commission is determined to win its fight against money-laundering, cigarette smuggling and connected serious cross-border crimes.”

RJ Reynolds described the lawsuit as “completely absurd” and called on the courts to dismiss it. The company said in a statement: “We operate our businesses in a legal, responsible manner. Any allegations that we were involved in, or aware of, money-laundering, conspiracy or any other illegal activities are completely absurd. We believe this suit should be dismissed, as were the other two EU cases filed in US court.”

Legal sources said that it was “highly unusual” to bring a money-laundering case against a major tobacco company. James Bagge, a partner in Norton Rose, the law firm, said: “Having failed the first time round with a direct smuggling charge, they seem to have converted it into a money-laundering claim.” Money-laundering involves “handling the proceeds of the crime”, in other words, smuggling.

Ten of the 15 EU member states are supporting the Commission in the case, although the UK is not one of them.

In November 2000 the EU brought a civil action against Philip Morris and RJ Reynolds for alleged involvement in cigarette smuggling. It sought compensation for lost revenues along with a court order preventing further smuggling.

The smuggling claims were dismissed in February this year on the basis of a technical rule according to which a US court need not enforce a foreign tax claim. The court held that the rule did not apply to money-laundering.