In today's world of reform and oversight, few publicly held companies would be brazen enough to say "no" to the U.S. Securities and Exchange Commission, but that is exactly what R.J. Reynolds Tobacco Holdings Inc. has done.
Reynolds has refused to hand over documents requested in a July 3 SEC subpoena claiming the documents contain confidential information that would harm the company if it fell into the hands of its competitors or the U.S. Department of Justice. The federal government is embroiled in a lawsuit with Reynolds and other cigarette makers, seeking $289 billion in fines for what it calls deceptive and fraudulent practices.
Dow Jones reported that the Winston-Salem, NC-based R.J. Reynolds, maker of Salem, Winston and Camel cigarettes, tends to be extremely protective of its corporate information, much more so than its chief competitor, Philip Morris USA unit of Altria Group Inc. Reynolds ranks second after Philip Morris based on revenue.
Reynolds said it has turned over some of the documents the SEC requested and has offered to provide a list of others, but not the actual documents. The SEC, which went to court just 19 times last year to compel compliance with its requests, has said it would sue to gain access to records showing the company's smoking and health litigation costs. Reynolds disclosed last week in a SEC filing that the agency is looking into possible securities laws violations.
Specifically, the SEC wants to see the breakdown of the litigation costs in relation to the company's sales, general and administrative expenses statement, Reuters reported.
Reynolds argument is that many of the requested documents are privileged under lawyer-client confidentiality rules and said that it knows of no other company that is being asked to provide this level of information to the SEC, especially since the SEC's probe does not involve claims of financial or accounting irregularities.