U.S. Securities & Exchange Commission
SEC Seal
Home Previous Page
U.S. Securities and Exchange Commission


Litigation Release No. 18288 / August 14, 2003

SEC Commences Subpoena Enforcement Action Against R.J. Reynolds Tobacco Holdings, Inc.

Securities and Exchange Commission v. R.J. Reynolds Tobacco Holdings, Inc. Misc. No. 1:03MS01651 (JDB) (D.D.C. filed Aug. 14, 2003)

The Securities and Exchange Commission announced today that it has commenced a subpoena enforcement action against R.J. Reynolds Tobacco Holdings, Inc. ("RJR") in the United States District Court for the District of Columbia. The Commission issued the subpoena on July 3, 2003, requiring RJR to produce documents by July 18, 2003 and requiring its Custodian of Records to appear for testimony on July 29, 2003. The Commission asserts that RJR has failed to comply with the Commission's subpoena.

In its Application and supporting filings, the Commission alleges that, on June 24, 2003, it issued a Formal Order Directing Private Investigation and Designating Officers to Take Testimony ("Formal Order"). The Formal Order authorizes the staff to conduct an investigation into whether RJR has violated, is violating or is about to violate various provisions of the federal securities laws. The Commission asserts that the fees and expenses associated with RJR's defense of tobacco-related litigations - litigations which RJR, according to its publicly-disclosed policy, vigorously defends and does not settle - are relevant to its investigation.

In its Application and supporting filings, the Commission alleges that, on July 3, 2003, the staff issued a subpoena to RJR, requiring RJR to produce (i) documents that quantify RJR's litigation fees and expenses on a monthly, quarterly and annual basis for each tobacco-related litigation; (ii) documents that concern the effect of such fees and expenses on various measures of RJR's financial condition; and (iii) documents that reflect the consideration given to RJR's disclosure of such information. RJR produced a mere 6 documents in response to the subpoena, in addition to 5 documents it had produced earlier on a voluntary basis. None of the documents produced contain quantitative fee and expense data. None of the documents reflect the impact of such data on RJR's financial condition. RJR informed the Commission that it is withholding additional responsive documents on grounds of the attorney-client privilege and work product doctrine. RJR also informed the Commission that it believes its litigation fee and expense data is commercially sensitive and thus should not be produced absent the entry of a confidentiality agreement which would restrict the Commission's use of RJR's documents during its investigation, and subsequently, and would prohibit the Commission from coordinating its investigation with other law enforcement agencies. The Commission postponed the deposition of RJR's Custodian of Records since RJR has not produced a significant number of documents responsive to the Commission's subpoena.

Pursuant to its Application, the Commission is seeking an Order directing RJR to show cause why it should not be ordered by this Court to produce documents and provide testimony pursuant to the Commission's subpoena and an Order requiring RJR to comply fully with the Commission's subpoena.



Modified: 08/14/2003