Ottawa appeals ruling David Dodge must testify in cigarette smuggling case

The federal government is appealing a ruling that the Bank of Canada governor, David Dodge, must testify at the fraud trial of tobacco company JTI-Macdonald Corp.

Ottawa's appeal is slated to be heard Thursday by Justice Marc Labrosse of the Ontario Court of Appeal.

Ontario Superior Court Justice Paul Rivard ruled Dec. 7 that Dodge, who was federal deputy minister of finance from 1992 to 1997, can be called by the company.

Dodge was among 15 former and current lawyers and staff of the governments of Canada and Quebec who were subpoenaed by JTI-Macdonald. Rivard ruled that all but two of the people called must testify.

JTI-Macdonald and eight former or current executives were charged in February 2003 with fraud after an investigation into alleged smuggling of cigarettes in the 1990s.

Police laid six counts of fraud and one count of conspiracy against JTI-Macdonald Corp., formerly known as RJR-Macdonald, Inc., and several of its subsidiaries.

Investigators have accused the firms of conspiring to defraud the governments of Canada, Ontario and Quebec out of $1.2 billion in tax revenue between 1991 and 1996.

The companies are alleged to have supplied the Canadian black market with Canadian-brand tobacco products manufactured in Canada and Puerto Rico. Police claim the firms sold the cigarettes to U.S. wholesalers "knowing that these products were being smuggled back into Canada and onto the commercial market."

JTI-MacDonald, formerly known as RJR-MacDonald, Inc., has denied the charges. The company has argued that it sold the cigarettes to the U.S. wholesalers with the full knowledge of the government.