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Imperial Tobacco Executive Resigns

July 9, 2003

LONDON (AP) _ Imperial Tobacco PLC, the world’s fourth-largest tobacco company, Wednesday said it has accepted the resignation of an executive over allegations that its German subsidiary was involved in smuggling cigarettes into Iraq and Germany.

Imperial Tobacco said the investigation by German customs authorities at the Reemtsma unit could last for several years. As a result, it said, it suspended the seven employees implicated in the investigation, including its sales and marketing director Manfred Haeussler.

Haeussler subsequently resigned from his position as sales and marketing director and speaker of Reemtsma’s board. He will be suspended on full pay until the investigation is complete.

Investigators have said they suspect several managers of being accessories in a scheme to smuggle exported cigarettes back to Germany without paying customs duties.

Prosecutors also suspect the firm violated U.N. sanctions against Iraq by delivering about 17 million cigarettes worth to Iraq via a Turkish company in 2000.

Non-executive director and Reemtsma supervisory board member Ludger Staby, who isn’t under investigation, also resigned.

The company said it was appropriate to accept Staby’s resignation as he had previously been chief executive of Tchibo Holding AG _ which sold Reemtsma to Imperial Tobacco in May 2002 _ and Reemtsma itself until 1998.

Staby had been excluded from board meetings where the investigation had been discussed, and given the probe could run for another four to five years, it was felt that Staby wouldn’t be able to make a full and proper contribution in his role as a non-executive director.

In afternoon trading, the American depositary shares of Imperial Tobacco fell $1.45, or 4.2 percent, to $33.05, on the New York Stock Exchange.

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