is the unspoken ethic of all magicians
to not reveal the secrets.’
– David Copperfield
In fairness to the tobacco industry, it is conceivable that some of the examples I’ve assembled could perhaps be attributable to vindictive whistle-blowers or to rogue employees. But it is entirely inconceivable that all of them are.
The industry – even licensed, bigger players – has a long and consistent history of fines, felonies and infringements, spanning decades, across the globe.
There is ample proof that the tobacco industry incorporated smuggling and other tax and duty evasion measures as an explicit part of its business strategy.1
BAT’s internal documents suggest that smuggling operations were almost certainly conducted with the knowledge and often the direct involvement of senior executives within the company, including regional directors, a former head of BAT’s marketing department, senior marketing managers, and BAT area managers. BAT executives appear to have expressly been put in charge of various smuggling and contraband operations.2
And indeed, despite being publicly called out, BAT declared that it would not sue over allegations that its senior staff had been involved in smuggling, with David Hinchcliffe, the Chairman of Britain’s House of Commons Select Committee on Health noting: ‘I personally pressed BAT whether they intended to take legal action and they said they did not. You will draw your own conclusions from that, as I did mine.’3
BAT’s apparent one-time plans to manufacture cigarettes in Andorra for smuggling to Spain in 1992 were not a secret – a document detailing the strategy was sent from a BAT marketing executive to the head of BAT’s marketing department and copied to a BAT lawyer.4
In Brazil the then-Chairman of BAT Industries is directly implicated in planned smuggling operations in a memo sent from the Territorial Director for Latin America to the Managing Director of BAT Industries, the CEO of BAT’s Brazilian subsidiary, the Chairman of BAT and others: ‘I am advised that the BAT Industries Chairman has endorsed the approach that the Brazilian Operating Group increase its share of the Argentinean market via DNP [duty not paid, i.e. contraband].’5
As a lawsuit against PMI noted: ‘Defendants created a circuitous and clandestine distribution chain for the sale of cigarettes in order to facilitate smuggling. The decision to establish and maintain this distribution chain was made at the highest executive level of PMI. Defendants have collaborated with smugglers, encouraged smugglers, and sold cigarettes to smugglers, either directly or through intermediaries, while at the same time supporting the smugglers’ sales through the establishment and maintenance of so-called umbrella [cover] operations.’6
And, so, it is hardly surprising that a Reynolds sales executive, interviewed on a CBS documentary, would note that, ‘… We were considered the most – single-most – profitable business unit in the RJR Nabisco family of companies. They knew exactly where the money was coming from. On an average of approximately every other Monday, an in-house lawyer from upstairs would come down and talk to us, “Yeah, it’s sensitive, but we’re here. We’re all in this together. And it’s – it’s a loophole. It’s grey. It’s legal, OK?” The company knows where they made the $100 million. They know the customers that produced the $100 million.’7
The same Reynolds executive goes on to explain how: ‘We were told to keep no paperwork in this business [by vice president of sales at RJ Reynolds]. He insisted … “You’re not keeping any documents, are you?” He reminded me on many occasions not to keep any hard copy on any correspondence with their offices.’8
In a statement, a spokesman told CBS that neither RJ Reynolds Tobacco nor the parent company have been implicated in any criminal investigation.
At least some had the sense to ask how ethical this was, with one fax query from BAT’s headquarters to its branch office in Venezuela asking ‘… whether the company could continue with duty paid and duty not paid [contraband] in parallel and be seen as a clean and ethical company at the same time’.9
At a meeting at BAT’s UK headquarters, a memorandum records executives discussing smuggling into Nigeria: ‘Discussion was held concerning direct imports to Nigeria through Mr. Adji who would disguise the cigarette importation by calling the shipment something else, e.g. matches.’ 10
And although I haven’t seen the accounts for myself, numerous sources have alleged that this part of their trade was accounted for against separate cost centres, in dedicated bank accounts, typically in offshore tax havens like Switzerland11 – a fully entrenched, formal part of big tobacco’s business practices.
My concession aside that some of the examples may perhaps be attributable to rogue employees, there are many examples of big tobacco very well knowing about their employees being involved in illicit trade and doing nothing about it.12
Big tobacco was articulately called out on their behaviour during the UK’s Parliamentary Committee hearings on tobacco smuggling: ‘When my four-year-old is standing in the kitchen with jam all over his face and I go in and say, “Have you been at the jam?” And he tells me, “No, daddy, I haven’t,” that is what you three have been doing here. It is unbelievable. It is called circumstantial evidence and you are simply sitting there saying, “No, no, it wasn’t us. We didn’t know the market. We had no idea this was going on.” I believe you have lied to this committee. I believe you are the least credible witnesses that I have ever seen come before the committee of public accounts. You have lied unashamedly. If you did not know all I can say is that you must have been totally incompetent. If I were one of your shareholders I would say, “these guys are incompetent”.’ 13 (While we have the comments from this committee on record, unfortunately their ultimate findings were never publicly released.)
This reticence is just as apparent with BAT in South Africa: in 2016 they told us that they had requested a law firm to investigate allegations of criminality by the staff of a security firm employed by BAT. Since then? Nothing. It’s been years. We don’t know what that investigation found, or what corrective steps have been taken to ensure that similar improprieties would not be repeated in the future.14
Of course, they do nothing. As a Rothmans manager so articulately explains, ‘It would be stupid to ignore a growing market. I can’t answer the moral dilemma. We are in the business of pleasing our shareholders.’15
Big tobacco washes its hands. They sell cigarettes ex-factory, and once the truck leaves their premises, argue that ownership is transferred to the buyer and the tobacco company has no legal liability for where the cigarettes go next. At best, they may explain, ‘In our work, you can’t ask what they do with the cigarettes’.16
They are really simply rational actors, acting rationally in pursuit of profit.
It’s this same reticence to confront criminality that arguably, at least in part, explains big tobacco’s consistent history of unlawful behaviour. As an Imperial spokesman, Michel Descoteaux, himself has noted: ‘The industry absolutely knew that most of the exports were being smuggled back. Imperial was simply shipping cigarettes in response to orders by American dealers. What would you have us do?’17
(I will get back to what we would have you do, Mr Descoteaux, in a bit.)
First, let me pause to say that there are some individuals in the industry who have tried to clean it up.
For instance, the IT consultant who had been contracted by JTI, and somehow got information on related individuals that were being investigated by European agencies for smuggling. The list included 13 JTI employees and distributors. (So we have reason
