EC fraud unit acts.

The European Commission is taking legal action against two of the biggest tobacco companies in the world over allegations of involvement in cigarette smuggling, following the first major piece of investigation work undertaken by its new anti-fraud body OLAF.

On Monday the Commission filed a civil suit in New York against Philip Morris and RJ Reynolds. It is seeking compensation for financial losses it claims the European Union has suffered because of the companies’ ‘alleged involvement in smuggling cigarettes into the EU’.

The Commission has been working on a legal action against the US tobacco companies in relation to cigarette smuggling for four months.

EC Budget Commissioner Michaele Schreyer said in a statement: ‘The protection of the financial interests of the European Union is a high priority of the European Commission. The present case is a new step in our strategy to fight against fraud and financial irregularities.’

David Davies, vice president corporate affairs, Philip Morris Europe S.A., said he regretted the EC’s decision. ‘We are convinced that the far better approach would be for the Commission and all other interested parties to work together in the fight against trade in contraband,’ he said.

The move comes as the commission seeks to increase the number of people working for OLAF – which is charged with fighting transnational organised crime, fraud and any other illegal activity prejudicial to the Community budget – from the present level of around 150 officers to more than 300 by the end of 2001.

OLAF became operational on 1 June 1999 following the resignation of the entire European Commission under Jacques Santer after publication of a damaging report uncovering massive financial mismanagement.

Franz-Hermann Bruener arrived as director of the independent unit in March. His appointment followed pledges by EC vice-commissioner Neil Kinnock to back a radical overhaul of the EC’s financial control systems.

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