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CANADA: Bank of Canada Governor Dodge Testifies at JTI Tobacco Hearing

December 20th, 2005

David Dodge, governor of the Bank of Canada, testified at a hearing in a smuggling case against defendants including JTI-Macdonald Corp., after prosecutors tried to keep him and 12 other defense witnesses off the stand.

Dodge and the other 12 are former Canadian government officials. Prosecutors opposed their testimony, saying it would go beyond the proper scope of a preliminary hearing. Judge Jean- Marc Labrosse of the Ontario Court of Appeals last week ruled against the government, saying, ``The respondents have a statutory right to call evidence.''

JTI-Macdonald Corp., a unit of Japan Tobacco Inc., and other defendants are accused of exporting cigarettes to the U.S. in the 1990s knowing they would be smuggled back into Canada for sale on the black market.

Dodge, deputy minister of finance from 1992 to 1997, told investigators ``he had no reason to believe in 1992 to 1997 that JTI was involved in the smuggling of tobacco products,'' defense lawyer Scott Fenton said last week in an appeals court filing.

Dodge's testimony today can't be reported because of a court-imposed ban imposed to avoid influencing potential jurors. Prosecutors must prove at the hearing that they have enough evidence to justify a trial.

JTI-Macdonald, three Reynolds American Inc. units and eight former and current executives are charged with defrauding Canada of C$1.2 billion ($1 billion) in taxes and duties through cigarette-smuggling.

JTI-Macdonald denied the charges, saying the cigarettes were sold legally to U.S. distributors who passed them on to smugglers. The Reynolds American units -- R.J. Reynolds Tobacco Co., R.J. Reynolds Tobacco International and Northern Brands International Inc. -- dispute Canada's authority to try them and aren't represented in court.

The case is Regina v. JTI-Macdonald Inc., Ontario Provincial Court (Toronto).

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