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Within a short time, RJR was shipping three to four containers a week to LBL and other distributors. Sales briefs to Smith demonstrated that what the company called the ``parallel market'' or ``re-entry market'' was fast becoming first 30, then 50 per cent of the company's volume on a weekly basis, all going through the black hole of Akwesasne.

The cigarettes were sent to a Palisano free-trade zone in Buffalo where they were picked up by LBL and five other traders who shipped directly to Akwesasne.

So fast and furious was the business that RJR-Macdonald had no time to change the packaging to meet export requirements. So Palisano had to hire people to unwrap every carton and place a ``Not for Sale in Canada'' sticker on each package, then rewrap them for delivery to Akwesasne to make the shipments look legitimate, Thompson said.

There was ``no doubt in anybody's mind at any level of management at First Canadian Place where these people were going to be selling cigarettes,'' Thompson said.

With more than 50 per cent of its volume directed to the ``parallel market,'' RJR-Macdonald became concerned about the legal implications, and decided to consult its outside counsel, Tass Grivakes of the Montreal law firm Mackenzie Gervais.

Thompson said he and Smith were told by Grivakes the company was entering into a gray area that, while not illegal, could be a political hot potato.

Thompson commented: ``You say, `Gee, Les, you sound like a pretty naive cat here. You didn't even know that this was illegal.' I had been coached prior to getting involved in this business by a company lawyer. They convinced me that this is a gray area in the business. It's not black. What you're doing is a loophole in the business. `Go forward, young man,' that type of thing. It wasn't like, `Jeez, Les, you better be very careful out there. You could get arrested for managing this type of business.' That was never suggested.''

He said the company also hired some retired RCMP officers to check all their offices and the homes of executives for bugs. None were found.

Nevertheless, concerned about dealing directly with smugglers, RJR-Macdonald decided it needed to distance itself further from LBL and its other border distributors.

So in mid-1992, RJR-Macdonald set up a company in Winston-Salem, N.C., called Northern Brands International Inc. and registered it in Delaware with U.S. directors.

It was a subsidiary of RJR Nabisco Inc., an astonishing decision since it linked the smuggling directly to the U.S. parent company while distancing it from RJR-Macdonald.

RJR-Macdonald also opened a second front. In mid-1992, ostensibly to avoid a threatened federal export tax on tobacco, RJR-Macdonald moved cigarette-manufacturing machines out of its Montreal plant to Puerto Rico, where the company began manufacturing Export `A's for shipment to tax-free zones in Buffalo and New Jersey and then into Akwesasne.

By the end of 1992, IDF saw more than $30-million U.S. worth of cigarettes going through its books. But, according to the letter, not one penny went into an IDF account. It was all paid by LBL and other distributors directly to RJR-Macdonald's headquarters or through bank accounts in Puerto Rico or North Carolina.

(In 1993, RJR-Macdonald would put another $35.7 million U.S. through IDF's books. In 1994, Harms threatened to sue the company. In a letter dated Feb. 22, 1994, to Ed Lang and labeled ``Confidential,'' IDF claimed it was owed more than $3 million U.S. for services rendered. The letter outlines the entire Aruba operation. RJR-Macdonald promptly paid Harms the money owed, Thompson said. In an interview, Harms refused comment claiming he needed permission from U.S. prosecutors in Syracuse to speak about his dealings with RJR-Macdonald.)

At this point, RJR-Macdonald was now supplying smugglers from plants in both Montreal and Puerto Rico.

It also established a third sourcing plant. In 1992, it contracted with Standard Commercial Manufacturing in Wilson, North Carolina, to produce Export `A' fine-cut tobacco - loose tobacco sold in a can. Every leaf of this tobacco would be targeted for the black market, Thompson said.

By 1993, Thompson said, all three plants were working overtime supplying distributors for the Canadian black market. The ``parallel market'' business grew to almost 60 per cent of RJR-Macdonald's net profits. Smuggling was fast becoming the company's main source of income and the principal reason why its Canadian market share was increasing.

The growing sales energized a company that for years had watched helplessly as the popularity of its main brand, Export `A', declined. The increased volume and profits meant bigger bonuses for everybody. Just before Christmas in 1992, RJR-Macdonald persuaded LBL to ante up $5 million U.S. to pay for shipments that wouldn't be delivered until 1993 just so the higher-ups could enter them into the 1992 books and claim bigger bonuses.

But LBL couldn't get the cheque to Toronto because of a snowstorm. So Thompson said he flew to Dorval airport where he picked up LBL's cheque from a courier sent by Miller. Then he dashed to the nearest Royal Bank branch which had been kept open just so the money could be deposited into RJR-Macdonald's account before the company closed its year-end books.

When he arrived back in Toronto, fellow executives called him ``partner'' and gave high fives. ``Pal, you just solidified your career to retirement,'' one told him.

Executives were ecstatic about the new business. Thompson recalls them making Indian war cries when he passed them in the executive corridors. ``Wooo, wooo, wooo!'' They backslapped him and addressed him as ``Chief.''

Once, when TV news showed seizures of competitors' cigarettes, he said Smith told him: ``Either you are not selling enough or your customers are doing a better job than the competition's in avoiding seizures.''

Still, there was a growing desire to distance the company from the sales to smugglers. The need to consolidate and create a tightly controlled corporate structure became clear to top RJR-Macdonald executives and to the company's parent, RJ Reynolds Tobacco International, which at the time was based in Winston-Salem. (It would move the following year to Geneva, Switzerland.)

RJR Tobacco International organized a meeting of top financial people at the Graylyn Conference Centre in Winston-Salem on March 5, 1993.

Representing RJR-Macdonald was Peter MacGregor, an executive in the company's finance department and soon to become general manager of NBI. MacGregor made his presentation at about 10:15 a.m. It lasted about 30 minutes and outlined the reasons why and how RJR-Macdonald would use NBI as its conduit for selling cigarettes to the smugglers.

RJR-Macdonald relocated Les Thompson and Peter MacGregor to Winston-Salem - Thompson as sales director and MacGregor as finance director and general manager. Essentially, they were in charge of pushing as much product on the smugglers as possible. NBI, with its two employees and a secretary, was basically an American sales tool for RJR-Macdonald.

``(It was) of a highly sensitive nature, and the consideration for moving to the States was that it was very sensitive here, an out-of-sight out-of-mind type of an application of business,'' Thompson said.

Before he left for Winston-Salem in February 1993, RJR-Macdonald threw cigarettes, cigarettes online marlboro, marlboro cigarettes discount cigarettes online cigarettes & coffee Thompson a going-away party. It was held at an Italian restaurant in Oakville, west of Toronto, and was hosted by Stan Smith who lived close by in a large clapboard home on the lakeshore. The party went on into the early hours of the morning with about 60 to 70 raucous guests plus their wives or girlfriends. At its peak, Smith presented various gifts to Thompson and his wife.

``Les, we've got a special gift for you and it took my secretary two days to find,'' he announced. ``When you open the gift all I ask is that you put it on and you wear it. You have to wear the gift.''

Thompson opened the box and pulled out a large Indian headdress. When he put it on, its dangling eagle feathers almost touched the floor. Partygoers laughed and cheered.

Ensconced in NBI's offices at RJR Nabisco in Winston-Salem, Thompson began working the tobacco traders as he had done at head office in Toronto. Documents obtained by The Gazette show that weekly, sometimes daily, reports were sent by NBI to RJR-Macdonald seeking permission on each sale. Stan Smith signed off on them.

Thompson said RJR International lawyer Pierre Bourassa made regular visits to NBI offices and received regular briefings from Thompson and MacGregor on the progress of the business.

NBI regularly sent salesmen into Akwesasne to check inventories of RJR-Macdonald and its competitors in Indian warehouses, and assess RJR-Macdonald's market share. Both MacGregor and Thompson went along on some of these field trips. Thompson said he made about eight trips to Akwesasne where he and other employees inspected warehouses and talked to Indian smugglers. All reports were sent to head office, he said.

One sales report dated Sept. 16, 1993, and written by Chris Fragomeni, an RJR-Macdonald salesman, referred to the Indian warehousing operations as ``gray-market accounts.'' It stated that RJR-Macdonald products accounted for between 40 and 60 per cent of inventories in the reserve's six VOGUE discount CAMEL online MILD SEVEN cigarettes MORE online warehouses. Imperial had 15 to 40 per cent and Rothmans Benson & Hedges 10 to 20 per cent. It was clear NBI was making headway. RJR-Macdonald executives began referring to it as ``Nothing But Income.''

Competition to supply the ``parallel'' or ``re-entry'' market was expanding and by 1993 each of the three major Canadian tobacco companies were using basically identical corporate structures all feeding the same distributors who in turn fed the same Indian smugglers at Akwesasne.

Imperial Tobacco had decided in 1992 to go full steam ahead in supplying what it called its U.S. customers. First, however, the company had to settle longstanding trademark and royalty issues.

Since the Philip Morris company held the rights to sell Players in the U.S., Imperial signed a contract on Sept. 29,1992, with Philip Morris to sell Players to the U.S. company. The confidential agreement, obtained by The Gazette, specified that the Canadian taste, quality and packaging would be maintained and each package would carry the legend ``Made in Canada by Imperial Tobacco, Montreal, Canada for Philip Morris Inc.''

Documents obtained by The Gazette show Philip Morris's first order was for 150 cheap SALEM  million cigarettes or 15 40-foot containers. The first shipments were made Nov. 23 directly to Philip Morris.

Philip Morris sent most of the loads to a New Jersey ship chandler named J. Stanley Inc., who then sold them to LBL and other distributors.

Imperial marketed its du Maurier brands through a Miami-based trader named Jorge Azel and his company SMT. Most of the SMT du Mauriers were trucked to warehouses in Port Elizabeth, New Jersey, and then sold to third-party distributors such as LBL or Milhem Jr. Attea, a Buffalo trader, sources said.

Because of trademark restrictions, Imperial was not allowed to sell du Maurier into the U.S. without paying a 5-per-cent royalty to Peter Jackson (Overseas) Ltd., which, like Imperial, is owned by British American Tobacco (BAT). Since the vast majority of du Mauriers sent south were discount marlboro cigarettes   smuggled back into Canada, Imperial wanted a new deal. So in June 1993, Imperial's president, Don Brown, negotiated a royalty reduction to 2 per cent.

In a letter to BAT executive Ulrich Merter in London, England, Brown wrote: ``Until the smuggling issue is resolved, an increasing volume of our domestic sales in Canada will be exported, then smuggled back for sale here.''

In 1993, Imperial sent more than 6 billion cigarettes, or at least 600 40-foot containers, into the U.S., according to figures the company gave The Gazette.

One smuggling source told The Gazette that Imperial actively solicited business from smugglers. He said he met with an Imperial marketing agent named Richard Ward in the executive offices of the company's Montreal headquarters on at least three occasions in 1991 where they dirt cheap davidoff cigarettes  discussed purchasing tobacco which the company would deliver to the U.S. for the smugglers to bring back into Canada.

``It was clearly identified that the goods would be in the Canadian black market,'' he said. ``Richard Ward suggested that he would deliver cigarettes to a free-trade zone in Miami or any other free-trade zone as long as it wasn't too close to Akwesasne.'' He added that the company didn't want to appear to be feeding the black market.

Rothmans Benson & Hedges was a similar story. Its equivalent of NBI was an already established affiliate called Tobacco Exports International, run out of Atlanta, Ga. Its cigarettes went to the same smuggling networks. In 1992, it sent 3.5 billion cigarettes into the States. Most of them were virginia slims cigarettes  smuggled back into Canada.

Sources said Imperial and Rothmans used a relabelling plant set up in Champlain, N.Y., and run by a Montrealer named Michel Sylvestre. The plant was used to put American Surgeon-General stickers on the packages and reseal them with cellophane to meet U.S. packaging requirements and also so they wouldn't look as though they were ultimately destined for Canada. One source said Imperial helped obtain the machinery for this operation from England.

With all three major cigarette manufacturers now deeply involved in feeding the black cheap cigarettes   market, the chase was on to secure the loyalty of their third-party distributors, like Miller and the Tavanos.

An essential part of the marketing and sales strategy became entertainment. RJR-Macdonald approved about $1.6 million U.S. for NBI to entertain customers, Thompson said. ``Whatever they wanted was not out of the question.''

By the end of 1993, NBI profit reached $78 million U.S. The company's total 1993 net profit was $122 million U.S.

Before the company began dealing directly into the black market, RJR-Macdonald's total net earnings discount cigarettes   were about $74 million U.S., Thompson said.

What's more, its aggressive sales policy had pushed its share of the Canadian market to about 20 per cent. Even though the cigarettes were sold in the U.S., the sales were entered into the company books as Canadian domestic market share.

``So when the CEO stands up in front of his boss, he can say:

`Well, you know, we made $122 million, we sold 8 billion units and we Cheapest Cigarettes store Cheap cigarettes  drove our market share in Canada to over 20 per cent through these efforts,' '' Thompson said.

`Nothing but Inmates'

Statistics Canada figures show the big three tobacco companies exported 14.2 billion cigarettes into the U.S. in 1993, plus about 3 billion units of fine-cut tobacco. This does not include the cigarettes manufactured in Puerto Rico or the fine-cut made in Wilson, N.C.

The heady pace at which the tobacco companies were feeding the black hole of Akwesasne finally forced the federal and provincial governments to roll back taxes in February 1994 by as much as $20 a carton. Exports to the U.S. plummeted to about 2 billion cigarettes and 600 million units of fine-cut.

But the smuggling did not entirely dry up. Even with the thinner margins, some traders found it profitable. RJR-Macdonald continued to ship cigarettes through NBI to third-party distributors such as the Tavanos and Miller. NBI's net profits nose-dived to below $10 million U.S. But with Cheapest Cigarettes shop Cheap cigarettes online  only two people on the payroll it was still considered a win-win situation. NBI was a sort of insurance policy against future Canadian tax hikes, Thompson said.

Only the four western provinces kept their taxes high. So Thompson said Stan Smith told him to ``get your ass up to Alaska'' and evaluate whether discount cigaretts could be sold to smugglers through free-trade zones in that state. Thompson reported back that the geography was too much of an impediment.

NBI first learned there might be a police investigation into smuggling-related offences in January 1994 when it received a subpoena from a U.S. district court in Buffalo, N.Y. A grand jury wanted to see documents relating to shipments of cigarettes into a Buffalo free-trade zone.

By 1995, the investigation was in the hands of U.S. Assistant District Attorney Gregg Discount Cigarettes store - Discount Cheap cigarettes  West, head of the district's permanent strike force. He targeted Miller, his family, the Tavanos and their main Indian customers.

He also targeted NBI and Les Thompson. Because he was RJR-Macdonald's front man, Thompson's name seemed to be on every smuggler's lips.

When police told Thompson in June 1998 that he was the focus of a smuggling investigation, Cheapest Cigarettes store at Buy Online Cheap cigarettes  RJR-Macdonald executives joked that NBI now stood for ``Nothing But Inmates.''

Thompson said he was constantly told to ``stand tall'' and keep his mouth shut. He said company officials were worried that MacGregor, NBI's general manager, might be talking to police.

At a skins golf match in August 1997 in Whistler, B.C., Thompson said: ``Ed Lang took me aside and said: `I want you to go back and tell MacGregor, `Loose lips sink ships.' ''

During this time, Thompson was still working out of Winston-Salem directing duty-free sales in the northeast U.S. He said the company regularly supplied ship chandlers with containers of tax-free Winstons to be sold in the high tax markets in Europe.

When European police began seizing these shipments, Thompson said he was told to cut back on the sales to these Cigarettes store offers Cheap cigarettes  chandlers to one load a month. They wanted to keep the distribution channels alive, he said.

He said he was then shifted to Miami where he would operate the duty-free sales along the Mexico border. ``That largely is a cross-border environment very similar to what went on in the black hole in Cornwall,'' he said.

Meanwhile, RJR-Macdonald officials had begun leaving the company. Lang had resigned in 1993, retiring to a condo in Naples, Fla., though he remained on the board of directors. Peter MacGregor left NBI and took a job with Porsche America in Atlanta, Georgia.

Paul Neumann, Roland Kostantos, both vice-presidents of finance at RJR-Macdonald, and Pierre Brunelle, company president in charge of the Montreal plant, moved to Geneva to work for RJR International.

Stan Smith, who became chief operations officer, took a severance buyout in 1998. Last September, he moved to London, England.

Les Thompson was the only tobacco executive to be charged.

As for the firm he helped run, Northern Brands International Inc. pleaded guilty to a minor customs infraction and paid $15 million U.S. in fines and forfeiture. As part of the agreement, the U.S. Justice Department Northern District pledged not to take any further action against RJR Nabisco, Discount Cigarettes, cigarettes online Cigarettes-Planet.com offers cheap and high quality discount cigarettes online ! Cheap smokes cigarettes Cigarettes4smokes.com sales fresh, cheap and high quality tax free discount cigarettes online!  the New York parent company.

In November 1998, Philip Morris reported to shareholders that it is under investigation in the U.S. for alleged involvement in tobacco smuggling into Canada.

Meanwhile, the RCMP have launched three task forces to probe industry complicity in the smuggling. The Mounties raided RJR-Macdonald's head office in May. The firm has stated it is co-operating with the investigation and beyond that cannot comment.

A Cornwall-based RCMP task force is targeting U.S. distributors and last spring charged the J. Stanley company and its owners with conspiracy to defraud the Canadian government.

A Montreal task force is investigating Imperial Tobacco.

The federal justice department is also assembling proof for a possible billion-dollar lawsuit against the industry for tax fraud. The government is planning to launch the suit in New York State.

This year, RJR-Macdonald offered to settle for $100 million. The government rejected the offer.