Six Na­tions to­bacco firm su­ing Ot­tawa for $3 bil­lion

Grand River En­ter­prises al­leges breach of na­tive rights

The Hamilton Spectator - - FRONT PAGE - TEVIAH MORO

PART­NERS IN A SIX NA­TIONS to­bacco man­u­fac­tur­ing firm are su­ing the fed­eral gov­ern­ment for al­legedly forc­ing them to in­cor­po­rate and lose their tax-ex­empt sta­tus while fail­ing to stamp out con­tra­band com­peti­tors.

Grand River En­ter­prises’ (GRE) $3bil­lion claim ar­gues Ot­tawa is li­able for mis­fea­sance, neg­li­gence, breach of fidu­ciary duty and breach of Abo­rig­i­nal rights.

A re­cent On­tario Court of Ap­peal rul­ing has cleared a path to trial by re­ject­ing all but one of the fed­eral gov­ern­ment’s ar­gu­ments to de­rail the law­suit.

GRE’s le­gal coun­sel de­clined to com­ment on the June 23 Ap­peal Court de­ci­sion.

“Since this mat­ter re­mains in lit­i­ga­tion, we do not believe it is ap­pro­pri­ate to com­ment at this time,” John F.C. Ham­mond of Inch Ham­mond Pro­fes­sional Cor­po­ra­tion said in an email to The Spec­ta­tor.

Fed­eral spokesper­son An­drew Gow­ing said the gov­ern­ment “is still re­view­ing the de­tails of the de­ci­sion” and it’s “pre­ma­ture to com­ment on any next steps.”

GRE and four of its share­hold­ers — Jerry Mon­tour, Ken Hill, Curtis Styres and Gre­gory Smith — al­lege fed­eral of­fi­cials forced them to in­cor­po­rate to re­ceive an ex­cise li­cence for op­er­a­tion in 1996.

That opened them up to taxation and du­ties they wouldn’t have oth­er­wise paid on their per­sonal, on-re­serve prop­er­ties as stip­u­lated un­der the In­dian Act.

“The claim for ‘forced in­cor­po­ra­tion’ is a very un­usual and ground­break­ing claim,” Mur­ray Klippenstein, a Toronto-based lawyer ex­pe­ri­enced in First Na­tions rights lit­i­ga­tion, said Tues­day.

The claim also “raises im­por­tant ques­tions about lands that were specif­i­cally re­served for or rec­og­nized as In­dige­nous lands cen­turies ago by treaties and other agree­ments,” said Klippenstein, who’s not in­volved in the law­suit.

“This case may re­fo­cus the is­sues from look­ing at only cor­po­ra­tions to see­ing things as In­dige­nous peo­ple on In­dige­nous lands con­duct­ing busi­ness.”

The GRE part­ners also al­lege the fed­eral gov­ern­ment has failed to con­trol con­tra­band and coun­ter­feit to­bacco on Six Na­tions, which has re­sulted in fi­nan­cial losses due to an un­fair play­ing field.

The law­suit, last amended in 2013, claims $1.5 bil­lion in dam­ages as well as “eq­ui­table com­pen­sa­tion in the same amount.”

The Crown hasn’t yet filed a state­ment of de­fence but it did try to have the case tossed from Su­pe­rior Court, ar­gu­ing it lacked le­gal ba­sis and was a Tax Court mat­ter.

In the Ap­peal Court rul­ing, Jus­tice Glo­ria Ep­stein only backs the Crown’s ap­peal to dis­miss the breach of fidu­ciary duty claims based on the fed­eral gov­ern­ment’s fail­ure to en­force con­tra­band. “In all other re­spects I would dis­miss the ap­peal.”

Klippenstein noted the de­ci­sion doesn’t favour the claim but does say it’s worth se­ri­ous con­sid­er­a­tion, “which is quite sig­nif­i­cant.”

In the rul­ing, Ep­stein re­counts how the GRE part­ners were in talks with fed­eral DeHamil­ton part­ment of Na­tional Rev­enue of­fi­cials from 1993 to 1997 re­gard­ing their on-re­serve to­bacco busi­ness.

They were ul­ti­mately faced with the “gov­ern­ment’s ul­ti­ma­tum” to in­cor­po­rate to re­ceive an ex­cise li­cence, the judge writes. They agreed, but only if Ot­tawa stepped up en­force­ment of con­tra­band to­bacco.

But by 2003, the part­ners were com­plain­ing about the “in­creased avail­abil­ity” of il­le­gal prod­ucts on Six Na­tions while pay­ing “$50 mil­lion to $60 mil­lion a year in taxes and du­ties,” Ep­stein notes.

A Spec­ta­tor in­ves­ti­ga­tion noted GRE’s gross sales were more than $200 mil­lion in 2004.

The Non Smok­ers’ Rights As­so­ci­a­tion con­sid­ers the Oh­sweken-based firm a ma­jor player nearly in league with such heavy­weights as Im­pe­rial and Ben­son and Hedges.

Taxation on to­bacco prod­ucts is the most ef­fec­tive way of re­duc­ing con­sump­tion in the in­ter­est of public health, says Fran­cois Dam­p­housse, the as­so­ci­a­tion’s Que­bec di­rec­tor.

Dam­p­housse doesn’t dis­pute the ex­is­tence of black mar­ket to­bacco but says gov­ern­ment en­force­ment has made an ef­fort to bat­tle it.

“They have in­tro­duced many mea­sures to try and con­trol con­tra­band is­sues.”

First Na­tions lead­ers, mean­while, have crit­i­cized such en­force­ment as a vi­o­la­tion of con­sti­tu­tional rights.

The GRE case is the lat­est chap­ter in a com­plex and can­tan­ker­ous his­tory be­tween its part­ners and Ot­tawa.

In 1996, for ex­am­ple, Mon­tour, then 26, his father Peter Mon­tour, 57, Hill, 38, and Smith, 38, were among nine men charged by the RCMP with il­le­gally mak­ing and sell­ing to­bacco on Six Na­tions.

The elder Mon­tour, who died in 2012, pleaded guilty to con­spir­acy to smug­gle cig­a­rettes into Canada from the United States and pos­sess­ing pro­ceeds of crime. He was fined $640,000.

More re­cently, GRE has lit­i­gated in the United States over its abil­ity to sell cig­a­rettes there.

Klippenstein doesn’t ex­pect the lat­est Cana­dian law­suit to be re­solved any time soon.

“A case such as this will prob­a­bly go on for many, many years in the courts be­cause of the is­sues and the stakes in­volved, and all par­ties prob­a­bly rec­og­nize that.”

The claim for ‘forced in­cor­po­ra­tion’ is a very un­usual and ground­break­ing claim. TORONTO LAWYER MUR­RAY KLIPPENSTEIN

The shop floor of Grand River En­ter­prises ware­house, seen in 2004. The op­er­a­tion is on Chiefs­wood Road in Oh­sweken on Six Na­tions.

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