Web posted June 15, 2000 |
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Report (London, June 15) The British government is considering launching an in-depth investigation into "extremely serious" allegations of international tobacco smuggling by giant tobacco multinational BAT (British American Tobacco).
In a scathing report about the conduct of the tobacco industry, Britain's House of Commons Select Committee on Health said that the allegations, reported in Britain's Guardian newspaper and based on research by the Center for Public Integrity's International Consortium of Investigative Journalists, "merit careful investigation." "The allegations need to be looked at independently and we therefore call on the DTI [Department of Trade and Industry] to investigate them," the committee reported on June 14. Under Britain's 1985 Companies Act, companies that are suspected of fraud and misconduct can face investigation by DTI commercial inspectors who are granted powers of search and seizure, and who have the right to take evidence under oath from company employees and directors. The report on the "Tobacco Industry and the Health Risks of Smoking" was the result of a detailed nine-month investigation. It was unanimously approved by members of Parliament from all parties. Citing evidence subpoenaed from advertising agency files that showed how another tobacco company had advertised to boost smuggling, the committee warned, "we do not believe it would be appropriate for health policy to be shaped by the activities of criminal gangs." This company, Gallaher Group PLC, largest manufacturer of tobacco products for the British market, and its advertisers were "aware of the knowledge that the goods will be smuggled back into this country . . . their advertisers appear to deliberately frame their strategy to appeal to the criminals undertaking the smuggling." If the company concerned genuinely believes that the "problems associated with smuggled tobacco are a 'tragedy,' they should make sure that all their business practices and those of their advertisers work against the illegal trade rather than encourage it," the committee ruled. "The tobacco industry has run rings around the British Government for 50 years," Committee Chairman David Hinchliffe said. Referring journalists to industry lobby payments to members of Parliament that had been disclosed, he charged that there had hitherto been "manipulation of the political process around tobacco legislation." The British government's failure to totally ban cigarette advertising on racing cars, he said, had been "pusillanimous." Health targets to curb smoking had been set too low. A spokesman for the secretary of state for trade and industry, Stephen Byers, said that the proposal to investigate BAT's alleged involvement in smuggling was being taken "very seriously . . . [he will] actively consider the report's recommendations." BAT responded by restating that "The company has appointed a leading independent UK law firm with no previous connections to the Group to examine its current business practices and report to a special committee of independent non-executive directors. Their findings will be reported to shareholders and will be shared with the Department of Trade and Industry, and with the Committee, if they so wish." However, Committee members had said that they were not satisfied with an internal audit committee inquiry that BAT promised to launch in February. We will be calling for its findings when they are available. But this is not enough, they reported. The Health Committee also asked: "If [the allegations] prove to be substantiated, the case for criminal proceedings against BAT should be considered; if they prove to be false, then those perpetrating them should publicly apologize to BAT for what will have amounted to a malicious slur on the company's name." ICIJ's reports on international tobacco smuggling, in late January and early February, explained 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. One report dealt with Latin America, including Colombia. A second report focused on Asia. The reports were based on company documents disclosed in 1999, after the settlement of litigation by Minnesota against the five largest international tobacco companies. BAT then placed about 8 million pages of documents in a public depository in Guildford, England, as outlined by court order. BAT is the second-largest international tobacco company, after Philip Morris. Philip Morris was recently named in a civil Racketeer Influenced and Corrupt Organizations Act lawsuit filed in New York state by a majority of Colombian governors who allege the tobacco giant swindled them out of billions of dollars through cigarette smuggling into that South American country. An international study four years ago suggested that about one-third of global tobacco exports were never officially imported to any country, according to trade statistics. Instead, they disappeared into black markets all over the world. BAT's own documents, reproduced in the report, suggest that by 1993, the global market in smuggled cigarettes was about 300 billion a year. The same documents called for the company to prioritize "the active and effective management of such business." In internal company papers, smuggling was referred to as "DNP," or "Duty Not Paid." BAT told the committee that the phrase did not necessarily mean smuggling. But, according to BAT chairman Martin Broughton, "that is not to say that there are not times where DNP would be the same as smuggled in one market." Hinchliffe, the committee chairman, told journalists and industry representatives in London that he had taken note that BAT had declared that it would not sue over allegations that the company and its senior staff had been involved in smuggling. "I personally pressed BAT whether they intended to take legal action and they said they did not," he said. "You will draw your own conclusions from that, as I did mine," he added. BAT's policy on access to disclosed company records was "indefensible," the committee added. If BAT did not rapidly change its policy on access, and place on the Internet documents already scanned, "the obvious inference should be drawn that they are resisting any attempts to have wider public access to this material." Committee members had hired a professional archivist to accompany them when they inspected the Guildford Depository. Dr. Caroline Shenton found that the staff and managers were untrained, that restrictions on access were inexplicable, and that there was no reason why hundreds of thousands of documents already scanned had not been put on the Internet. The committee also inspected BAT's modern research and development facilities and noted that "with their highly qualified staff and state of the art equipment . . . [the contrast with] the archive, with its untrained staff and slow computers, was stark." BAT was also slammed in the committee report for its attitude to the World Health Organization, which is attempting to limit the death rate expected as a result of smoking between now and 2030, when the annual death toll is predicted to rise from 4 million to 10 million. "To call an organization committed to improving global health 'zealots' and a 'super-nanny' because of its concern about the 10 million deaths which will be caused by tobacco each year by the late 2020s seems to us bizarre . . . it would be a hollow victory if, as a result of more stringent action taken on tobacco control in the developed world, smoking related deaths were merely exported to the world's poorer nations." Concluding his presentation of the report, MP Hinchliffe warned, "the tobacco epidemic has hardly begun."
Duncan Campbell, based in the United Kingdom, is a member of the International Consortium of Investigative Journalists, a project of the Center for Public Integrity. Related reports:
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