Читать книгу Dirty Tobacco - Telita Snyckers - Страница 12

Some of the examples and case studies included in this book go back some years. It was important to include them, because they highlight a consistent pattern of behaviour spanning both decades and continents, and because it is only by understanding the industry’s consistent history of obfuscation and filibustering and legally dubious behaviour that we can begin to pre-empt the future.

The examples are not meant to be an exhaustive catalogue of smuggling and tax evasion, and of course include only those cases already in the public domain, because most tax and customs agencies are sworn to secrecy. Once you start delving into the industry it becomes something of a rabbit hole. For every example quoted in this book, you can likely find ten others. And while the examples are illustrative only, they do make the point that the illicit trade in tobacco products is not limited to backyard taverns, bootleggers and mobsters, but has very much been the playground of big tobacco.

BAT kindly documented for us in detail some of its forays into China in the 1980s:1 BAT documents note how official imports offered ‘relative poor corporate profitability’2 because of the highly restrictive import quotas and tariffs, leading to large-scale smuggling to access the world’s largest market of smokers, activities foreign tobacco companies were aware of.

BAT’s own records detail how they did it: by setting up BAT Distribution Ltd to manage illicit trade in Asia, which they were advised ‘should be incorporated in a tax haven of choice’3 to ensure that the contraband trade could be carried out ‘on an arms-length basis’.4 It needed to be ‘little more than a brass plate company with very low overheads and the flexibility to establish branch offices wherever the transit traders move’.5 Its activities remained fully controlled by the BAT China Group, and the structure was approved by BAT’s Chairman, to ‘ensure the efficient distribution within the China markets of duty free [illicit] BAT products’.6

BAT invested heavily in its illicit trade stream in China, with one of their vice presidents saying: ‘The best prospects for growth in the Chinese market continues [sic] to be the unofficial channels for the foreseeable future.’7

BAT’s Head of Corporate Planning at the time recognised the contraband trade’s vulnerability given the ‘danger of serious action by the authorities’.8 But that concern was not enough to stop the company from aggressively pursuing a black market for its products: ‘As long as free market sales remain dominant, alternative routes of distribution of unofficial imports [i.e. contraband] need to be examined and maximised. It is recognised that distribution of our product in China is key to BAT’s long-term success.’9

Against this background, BAT’s own records seem to suggest it was physically exporting 53 times more cigarettes to China than it was officially declaring for import.10 So, for every container it declared, 53 others appear not to have been declared to the authorities and were instead smuggled into the country. Little wonder, then, that BAT viewed China as ‘one of the larger profit centres’,11 with an apparent 25% of BAT’s profits coming ‘from transit trade to China’12 (and remember, ‘transit trade’ is an industry euphemism for smuggling).

It seems it wasn’t just BAT plying the black trade – PMI apparently was too, as BAT itself claimed: ‘… the PMI model places an intermediary between PMI Asia and the transit traders. We have two objections. First the transit trade [contraband] still originated with Philip Morris Asia and is controlled by that company. That is similar to the present situation with BAT Hong Kong. The second objection is that the intermediary adds another level of profit absorption and is harder to control. The apparent distancing has little effect since the business is transit [contraband] trade. BAT group can pretend ignorance that its cigarettes are being distributed through the transit trade as much and as justifiably as Philip Morris can.’13

This example from the late eighties may admittedly be relatively old. But it does raise this question: If indeed BAT had managed to secure 25% of its profits ‘from transit [contraband] trade to China’,14 and if one were to give it the benefit of the doubt and assume for a moment it no longer runs a contraband supply chain in China, how has it compensated for the loss of this quite significant chunk of its profits? And if it could do this with some impunity in China, what has it managed to pull off in other countries?

It didn’t end there. Smuggling has proliferated in the industry, decade after decade, country after country.

In the nineties, evidence suggests that BAT and PMI ran smuggling rings in Colombia,15 and paid $1,7 billion in criminal fines and civil restitution for their role in smuggling schemes in Canada;16 11 PMI executives were charged with tax fraud in Italy to the tune of $400 million;17 PMI was accused of smuggling cigarettes into South Africa;18 and a BAT manager was convicted of taking bribes from smugglers in Hong Kong.19

In an interview, Les Thompson, a sales executive who worked for RJ Reynolds, recalled the situation in Canada after the government raised the tax on cigarettes sharply: ‘Really the options were limited. The no-brainer in the equation becomes: We have to enter the black market. We have to enter the black market. We’ve got to pursue this tax-free environment through the illegal smuggling efforts back into Canada.’20

In the 2000s, The Guardian newspaper exposed how BAT benefitted from smuggling practices in both the UK and beyond;21 racketeering charges were filed against BAT in Colombia;22 The Guardian news­paper reported that court documents show that as much as $200 million in smuggling profits allegedly made its way to Geneva in one year alone;23 Imperial was accused of smuggling as much as 65% of their packs onto the UK market;24 Imperial and Rothmans were fined $1,15 billion for smuggling in Canada;25 a BBC documentary exposed how BAT was seemingly breaking the rules in Nigeria, Malawi and Mauritius;26 more than 20 000 internal documents highlighted how PMI’s Gallaher set up a trading ‘environment’ conducive to illegal activity;27 a media report based on internal industry documents attributed extensive smuggling to BAT in West Africa28 and to smuggling in Sudan, Birao, Nigeria,29 as well as under-invoicing in Nigeria.30

According to a BAT Nigeria document: ‘General trade [illicit] movements to this end market will remain a priority throughout the period. Both legal and transit importing [smuggling] would be required to properly – and profitably – develop the brand. Legal imports would be loss making and significantly under invoiced because of Nigeria’s high duty rates.’31

In 2000 the European Commission launched an investigation into contraband American cigarettes on the European market, and filed a lawsuit against big tobacco.32 The charge sheet filed is simply astonishing: ‘… Controlling entire smuggling operations – an ongoing global scheme to smuggle cigarettes, launder the proceeds of narcotics trafficking, obstruct government oversight of the tobacco industry, fix prices, bribe foreign public officials, conduct illegal trade with terrorist groups and state sponsors of terrorism, engaging in organised crime, money laundering …’33

Around the same time The Guardian tells us that BAT issued a profit warning to its shareholders that profits were expected to plummet by £500 million as it was being forced to clamp down on illegal trafficking.34 (That sounds remarkably like an admission in and of itself.)

Big tobacco settled the case on terms that are simply staggering, which included having to compensate the EU for the tax revenues lost as a result of the smuggling of its packs. PMI’s liability under the settlement? $1,250 billion. Read that again: PMI had to pay $1,250 billion in compensation for the tax losses caused by the smuggling of its packs. JTI had to pay the EU $400 million (paid off over a period of 15 years), Imperial $300 million (paid over 20 years), and BAT $200 million (to be paid over 20 years, with the last payment due in 2030).35 That’s a lot of smuggled packs.

Rather tellingly, almost immediately after the settlement agreement was signed, the volume of cigarettes shipped through Antwerp, the hub from where investigators believed the contraband cigarettes were being shipped, decreased from 72 billion cigarettes to 2 billion.36

Just as an aside, this is on top of an earlier settlement agreement with a number of US states to compensate for the healthcare crisis tobacco had caused, where big tobacco was also forced to pay $206 billion in financial compensation.37

Did it stop there? No. Big tobacco seems to have been acting with impunity even more recently.

In the decade since 2010, a smuggling hub allegedly run by JTI in Russia and the Middle East was exposed;38 BAT reportedly took over from its transiteers in Djibouti and Guinea to start smuggling itself;39 Spain launched a lawsuit against PMI for involvement in organised crime in pursuit of a ‘massive, ongoing smuggling scheme’;40 Canada filed a smuggling and racketeering lawsuit against RJ Reynolds, to the tune of $1 billion (the case was dismissed only on a technicality);41 PMI was sued for $3 billion in damages for smuggling, money-laundering, conspiracy and racketeering in Colombia (claims it denied);42 the EU launched a probe into JTI for a cigarette deal that is believed to have aided Syria;43 Ecuador filed a racketeering charge against PMI, BAT and RJ Reynolds;44 BAT was fined £650 000 for oversupplying tobacco in the EU by as much as 240%;45 BAT was accused of having bribed a politician to ensure that a cigarette track and trace tender was not awarded in Kenya;46 PMI was fined $3,15 billion for tax evasion in Thailand;47 PMI and BAT were fined $260 million for illegal cigarette hoarding in Korea;48 PMI was slapped with a lawsuit accusing it of fraud and corruption in relation to the implementation of its traceability solution Codentify in Buenos Aires;49 PMI was charged with tax evasion in Thailand and the Philippines, facing 272 counts of fraud and a potential penalty of $2,29 billion;50 and by 2017 BAT was being investigated by the UK Serious Fraud Office for corruption and bribery in (amongst others) Kenya, Burundi, Rwanda and Comoros Islands51 (that investigation had, at the time of writing, not yet been concluded). Oh, and BAT subsidiaries have also been fined or investigated for tax evasion or fraud charges in Australia, Korea, Vietnam, Bangladesh, and Russia.52

In 2018, we know that South Africa’s taxman reportedly found that BAT had made ‘misrepresentations’ and ‘false declarations’ relating to the use of rebates and purported exports, and the non-disclosure of material facts, and slapped them with a R214 million ($15 million) assessment for duty evasion.53

Then in 2019, the BBC exposed evidence of BAT’s illegal operations in the Democratic Republic of Congo, in particular on the back of information provided by whistle-blower Paul Hopkins.54 Hopkins – a former soldier in the Irish Army’s special forces – worked for BAT for 13 years in Africa, where he says he ran security and anti-smuggling operations, and claimed he arranged for the payment of BAT’s bribes. He fell out with the company and turned whistle-blower. In an interview with The Guardian, Hopkins explains why he believes fragile states in Africa and elsewhere are of particular interest to big tobacco: ‘If you have no government, you have nobody annoying you about health warnings and nicotine content. No customs. You basically pay your tax to the local militias on the airfield where you are landing.’55 (BAT has gone on record simply calling Hopkins a disgruntled ex-employee.)

Hopkins further tells how he was, on several occasions, required to take millions of dollars into the DRC, destined for what is apparently the unmapped town of Auzi, built by BAT in the 1950s with a church and a school. He has photos of himself with $2,5 million in cash which he says is from one of the drops he did for BAT. En route there he’d protect himself in rebel-run Congo by renting an AK47, and hiding the dollars either in BAT-branded promotional items like hats and pens, or on occasion under a priest’s cassock.

‘These drops had to be illegal, that amount across an international border without any government being aware of it. It had been going on before I joined,’ Hopkins claimed.56

(See addendum 6 for selected extracts transcribed from the BBC’s interview with Hopkins, and addendum 7 for more details on the various other smuggling and tax evasion cases.)57

The BBC documentary quoted BAT as saying that its ‘accusers in [the] programme left us in acrimonious circumstances, clearly demonstrated by the false picture they present of how we do business’. The company was also quoted as saying it was committed to operating to the very, very highest standards of corporate conduct.

I asked the respective big tobacco companies for comment on the various allegations this book explores. Reynolds replied within a day that they had ‘no comment’. BAT, PMI and Imperial never replied.

TISA, the now-defunct industry body that represents big tobacco in South Africa, has previously denied that their members are involved in illegal activities and have pledged to take action against any of their members found to be contravening the tax, customs or excise laws of the country.

JTI replied that the allegations were ‘outdated’, relying in part on a 2013 report from OLAF (the EU Anti-Fraud Office) to the effect that ‘cheap whites and counterfeits (including the counterfeiting of cheap whites) dominate in large-scale seizures, and in particular in seizures related to containerised transport,’58 but this relates only to smuggling in containers (which the same report says is on the decrease), and very pertinently only relates to the EU.

Big tobacco has had more than its share of felonies, fines and infringements – and increasingly so over the last 20 years. It has been faced with unprecedented monetary penalties that would have crippled most other industries. On top of that, add advertising restrictions and all-out bans, and damning evidence and criminal prosecutions in relation to covering up scientific evidence on the dangers of smoking, and the fact that it kills more than half of its customers. And yet this industry not only survives, it thrives.

Make no mistake – the industry knows its hands are dirty.

As Prof. Anna Gilmore, Director of the Tobacco Control Research Group at the University of Bath, puts it: ‘Diverse and growing evidence shows that tobacco industry illicit (product) outstrips the problems of cheap whites and counterfeits and remains the single largest problem in illicit tobacco; that incentives for industry involvement have barely changed since their well-documented involvement in the 1990s; that tobacco companies likely continue to be involved in and benefit from tobacco smuggling.’ 59