By Lee Carter in Toronto

The Canadian government has filed a lawsuit in an American federal court alleging that a leading US tobacco company was involved in smuggling cigarettes into Canada.

The civil lawsuit, filed in Syracuse in New York State, is seeking damages of a $1,000m from RJR Reynolds, manufacturers of the Winston and Camel brands in America.

The Canadian government further alleges that the tobacco company deliberately undermined Canada's high taxation on cigarettes.

Widespread operation

The lawsuit refers to a major criminal operation involving millions of cigarettes smuggled into Canada between 1991 and 1994.

After imposing high taxes on cigarettes, almost doubling their price, the Canadian authorities were besieged by widespread smuggling of cigarettes from the US.

Many of the cigarettes were domestic Canadian brands, which meant that they had first been exported to America before being smuggled back.

Finally, in a humiliating defeat in February 1994, the Canadian government dramatically reduced cigarette taxes to stop the smuggling.

The role of tobacco companies in the smuggling has long been suspected.

Smuggling conspiracy

Canada says crucial evidence came to light with the prosecution in an American court earlier this year of a former RJR Reynolds employee for running a smuggling operation.

Ottawa alleges that high-level executives were involved in encouraging and authorising the smuggling conspiracy.

The suit is being launched under an American racketeering law covering organised crime. Many of the defendants are based in the US, as are witnesses and documents relating to the case.