Philip Morris, EU Said to Be Near Deal

Philip Morris International and the European Union have sealed a deal for the maker of Marlboro cigarettes to pay $1 billion to fight smuggling and counterfeits that are costing both sides hundreds of millions annually in lost taxes and sales, sources familiar with the matter said Thursday.

Talks to end years of legal wrangling will conclude Friday with the signing of a cooperation agreement, one source familiar with the talks said. The outlines of the settlement were first reported by The Times in April.

EU Budget Commissioner Michaele Schreyer, who spearheaded the fight, scheduled a news conference on “combating fraud.” Her spokesman declined to elaborate.

A company spokeswoman also declined to comment.

Philip Morris International, a unit of U.S. tobacco and food giant Altria Group Inc., would make payments over 12 years totaling about $1 billion -- the biggest sum the EU has ever extracted from a single company, the sources said.

In return, they said, it would resolve all disputes between the company and the EU, which has filed two lawsuits in recent years against Philip Morris and was considering filing a third.

The latest suit, filed in New York in 2001, accused U.S. tobacco giants of complicity in cigarette smuggling by intentionally oversupplying neighboring countries.

The lawsuit was dismissed on jurisdictional grounds, but a U.S. appeals court gave the EU a green light in January to file a new one based on money-laundering laws.

The company has denied involvement but says the flow of fake Marlboros into the high-margin European market costs it $100 million each year.

The draft agreement had to be reviewed by EU governments that joined the European Commission’s legal action before it could be signed.

Both sides stressed then that the prospective payments were not penalties but a commitment to work together.

Altria shares rose 10 cents to $49.40 on the New York Stock Exchange.