BAT Involvement in Tobacco Smuggling

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In January 2000 the Guardian newspaper, working with the International Consortium of Investigative Journalists, published an investigation into British American Tobacco's facilitation of tobacco smuggling, based on 11,000 documents from the tobacco archive.

Historical

"Benefiting from Black Marketeering on a Massive Scale"

The documents revealed how "British American Tobacco condoned tax evasion and exploited the smuggling of billions of cigarettes in a global effort to boost sales and lure generations of new smokers", reported the paper, adding that BAT had "benefited from black marketeering on a massive scale."

The disclosed documents revealed that the smuggling "channels" which the company's cigarettes travelled along were always operated and managed by others. But the documents showed euphemisms - including "duty not paid", "general trade" and "transit" - being used to describe the smuggling channels.

The documents revealed smuggling marketing strategies and sales drives in Canada, Latin America and Asia.[1]

Although there was no suggestion that BAT broke the law, it did facilitate illegal trade. In Colombia, Jose Manuel Arias Carrizosa, executive director of the federation of Colombian governors, told the Guardian they were seeking "an indemnification for damages caused through contraband of cigarettes into the country. We think there are two markets, one legitimate that pays its duties and taxes, and the other much bigger, illegal," he said. "That cannot be happening without the knowledge of the producing companies."

BAT said it knew that some of its products were "handled other than through official channels", but added: "We cannot control the distribution chain all the way to the final customer."[2]

BAT dismissed the allegations, issuing a statement: "British American Tobacco companies do not smuggle. We do not condone smuggling, and we do not encourage or collude with others to smuggle on our behalf". [3]

Allegations that Smuggling "Has Been Company Policy Since the 1960s"

In June 2000, the Health Select Committee investigated the matter. One of those to give evidence was Duncan Campbell, the investigative journalist who had worked with the Guardian on the BAT investigation. His written evidence alleged that:

Smuggling, often organised in a furtive and clandestine manner, has been BAT company policy since the late 1960s. Under the stewardship of former chairman Sir Patrick Sheehy, the deliberate smuggling of BAT products evolved from an ad hoc activity into an organised and centrally managed system of lawbreaking. This was overseen at the highest levels within the United Kingdom headquarters organisation. The company directors and managers who were involved were, on evidence that is plentifully available, fully aware that what they organised was unlawful in those countries where they placed smuggled products.

He continued:

All current executive directors of BAT PLC and a majority of the current Management Board have been routinely involved in planning, organising or managing criminal activity, and/or have knowingly consented to the deliberate smuggling of contraband BAT tobacco products around the world. A very substantial part of the company’s revenues derives from this misconduct." [4]

The Health Select Committee concluded that "the allegations need to be looked at independently and we therefore call on the DTI to investigate them".[5]

In October 2000, the Department of Trade and Industry (DTI) subsequently did raid BAT's London offices and launched an investigation into BAT's role in smuggling. Then Secretary of State Stephen Byers said that he had appointed investigators to look into the allegations in response to a Health Select Committee report on the tobacco industry. He said: "I have given careful consideration to the unanimous recommendation of the select committee that the DTI should investigate the allegations of BAT's involvement in smuggling". [6]

"Involvement in Organised Crime"

In September 2000, BAT faced action by the Departments (States) of Colombia which alleged that it committed violations of racketeering laws: “…arising from its involvement in organized crime in pursuit of a massive, ongoing smuggling scheme".[7] [8]

Anti-Smuggling Agreements with the Authorities

Like Gallaher six months earlier, BAT signed a Memorandum of Understanding with HM Customs & Excise in October 2002, to cooperate to stamp out tobacco smuggling.[9]

Four years later in 2006, again just like other tobacco companies, BAT signed a follow-up Memorandum of Understanding with HM Revenue and Customs "to set out a framework of co-operation between HM Revenue & Customs and BAT in order to seek to limit the smuggling of both contraband and counterfeit BAT product into the UK, while minimising obstacles to legitimate trade".[10]

  • For more on the role of BAT's deputy chairman in denying involvement in smuggling, see the page on Kenneth Clarke.

Related TobaccoTactics Resources

  • This page is part of the historical section of Tobacco Smuggling, which also includes:

TCRG Research

Visit Tobacco Control Research Group: Peer-Reviewed Research for a full list of our journal articles of tobacco industry influence on health policy.

TCRG Blogs

Notes

  1. Kevin Maguire and Duncan Campbell, "Exposed: How billions of BAT cigarettes end up on black markets", The Guardian, 31 January 2000, accessed September 2011
  2. Maud S Beelman, Duncan Campbell, Maria Teresa Ronderos and Erik J Schelzig, "How smuggling helps lure generations of new smokers", The Guardian, 31 January 2000, accessed September 2011
  3. BAT, Smuggling: Our View, 16 February 2000, Accessed September 2011
  4. House of Commons, Inquiry into the Tobacco Industry and the Health Risks of Smoking, Note of Evidence by Duncan Campbell in Respect of Planning, Organisation, and Management of Cigarette Smuggling by BAT PLC and Related Issues, Health Select Committee, Session 1999-2000 , Accessed September 2011
  5. Health Select Committee, Second Report, June 2000, accessed September 2011
  6. The Guardian, "DTI to investigate BAT smuggling claims", 30 October 2000, Accessed September 2011
  7. ASH, BAT faces punitive racketeering charges over Colombian cigarette smuggling, Press release, 21 September 2000
  8. Colombian State Governors Racketeering (RICO) action against Philip Morris and BAT Eastern District of New York, 20 September 2000, Accessed September 2011
  9. Memorandum of Understanding Between HM Customs & Excise and BAT (UK & Export) Limited, 30 October 2002, accessed September 2011
  10. Memorandum of Understanding Between HM Revenue & Customs and BAT UK & EXPORT) Limited, 15 March 2006, accessed September 2011