Imperial Boss Held in German Smuggling Raid

An Imperial Tobacco main board director was yesterday charged by the German authorities after police and customs officials investigating allegations of smuggling and Iraqi sanctions busting raided the group's Reemtsma subsidiary.

Hundreds of customs officials and police swooped on homes and offices in and around Hamburg, home to Germany's third largest cigarette company.

Six other Reemtsma managers, as well as Manfred Haussler, Imperial's sales and marketing director, are understood to have been charged in connection with the investigation. The raids came less than a week after Imperial was castigated by a House of Commons committee which said the company was not doing enough to help customs and excise curb cigarette smuggling.

In a statement, Imperial said the group was aware of the raid on the Reemtsma offices and that managers had been charged. The statement added: "The company understands that the officers are investigating alleged foreign trading and related violations by Reemtsma, prior to ownership by Imperial Tobacco group."

Mr Haussler became a main board director of Imperial after the €5.3bn acquisition of Reemtsma last year.

Imperial would cooperate fully with the investigation.

According to the Hamburg state prosecutor's office, some 260 customs officers are investigating suspicions that non-taxed cigarettes were exported from Germany and then smuggled back into the country. Officials also believe that some 17 million cigarettes, worth about €250,000, were smuggled into Iraq in 2000 in defiance of international embargoes.

Last year the world customs organisation said Reemtsma's bestselling brand, West, was Europe's most frequently smuggled cigarette.

Last week the House of Commons public accounts committee said sales of smuggled Superkings and Regal cigarettes - two of Imperial's leading brands - heavily outsold those purchased legitimately.

Edward Leigh, the committee chairman and Conservative MP for Gainsbrough, said: "The company has a public duty to cooperate fully to help reduce these losses to the public purse.

"The company needs to take a positive aproach to prevent smuggling, notably by providing more timely responses to Customs' requests for information and by exercising greater discretion in their choice of markets."

Imperial insisted that the situation described in the report was an historic one and that it was cooperating fully with customs.

"We cannot emphasise strongly enough that we want to cooperate with customs to stamp out cigarette smuggling," a spokesman said in reponse to the committee's criticisms.