Dirty Tobacco. Telita Snyckers
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 to believe, for instance, that mobsters had financial stakes in some of JTI’s largest Russian distributorships,18 and in Montenegro, a JTI distributor was apparently retained despite being a convicted cigarette smuggler.19) The consultant passed the information on to JTI for them to investigate the allegations against their employees and contractors. The VP heading Global Brand Integrity Operations, David Reynolds, apparently wanted to take action against the individuals on the list; but instead says he was told in no uncertain terms to return the information to the consultant, to delete all copies of the data from JTI’s servers, and to refrain from using similar information in the future.20
Mr Reynolds went on to pen an extraordinary note explaining his concerns in some detail, including noting, ‘Shipments to unauthorized buyers have reached a massive scale exposing the company to fines potentially of around €30 million. We have repeatedly reported our findings to JTI management … but have yet to elicit any concerted effort to halt these diversions. In recent months members of my team have been directed not to investigate several instances of smuggling related to specific JTI distributors … and the possible involvement of JTI employees with known smugglers.’21 (The full text of his email is included in addendum 8 – it’s really worth a read.) Not surprisingly, he was fired days after sending the email, along with his assistant. JTI says he is an ex-employee spreading false information. You make up your own mind.
Another colleague in JTI subsequently commented: ‘You have to ask yourself how serious they are when they bring in people from Gallaher to take over. The culture in Gallaher was very much, “Let’s not get caught, but if we do get caught, be prepared to defend ourselves.” They didn’t take steps to stop smuggling, just to insulate themselves when it came out.’22 (Gallaher had been bought by JTI after having been implicated repeatedly in smuggling operations, and with court papers detailing how they helped smugglers evade more than $1,5 billion in customs duties in the UK.)23
Two things stand out for me: the first is that big tobacco must have known and did nothing. But the second is that there are a few good souls in the industry who are willing to take a stand. We need more of those.
Even in more recent Project Sun reports – published by KPMG, and dealing with the state of illicit tobacco, commissioned by the tobacco industry – it is noted how ‘… varying sanctions across member states currently influence decisions by big tobacco about where to conduct operations or which routes to take when transporting goods across the EU.’24 Where I come from, ‘sanctions’ generally tend only to worry those who have something to hide.
The question, of course, is what big tobacco’s position is on this today, and how their local in-country corporate strategy and profit considerations and risk appetite differ from their global counterparts.
What we’ve seen with big tobacco’s heavy involvement in supplying the contraband market is attributable to a permutation of only one of three possible explanations:
Firstly, perhaps it’s in their DNA and it simply forms part of their business strategy (and there certainly seems to be at least some evidence of this being the case).
Secondly, maybe they just turn a blind eye. Perhaps the existence of illicit activities within the company is known, albeit perhaps not explicitly endorsed, and are allowed to perpetuate, as the bottom-line benefits from it.
Or, thirdly, perhaps they simply employ countless rogue employees across the globe who perpetually perpetrate illicit activities without their knowledge or endorsement, and with the companies unable to establish internal controls and processes to offer any level of protection against such employees.
I can’t think of any other scenarios that explain the industry’s persistent history of and association with criminality. Whichever one of the three it is, it means that our governments can have no confidence – at the very least – in industry’s tax and duty declarations. In all three cases the solution is simple: the industry cannot be trusted to regulate itself and requires stronger regulatory oversight and more robust supply chain security measures across the tobacco value chain.
‘At best, tobacco companies are failing to control their supply chain, overproducing in some markets and oversupplying to others in the knowledge their products will end up on the illicit market,’ writes Prof. Anna Gilmore, Director of the Tobacco Control Research Group at the University of Bath. ‘At worst, ex-employees insist JTI remained actively involved, describing “rampant smuggling”. BAT staff suspected JTI was facilitating smuggling into the DRC but BAT also clandestinely moved millions of dollars in cash from Uganda to the DRC to buy tobacco leaf which was presumably then illegally exported. BAT cigarettes being distributed by a company implicated in tobacco smuggling were ending up in the illicit market with BAT staff agreeing not to discuss the problem by email.’25
Many other industries, with commodities that are far less hazardous, and that are far less vulnerable to criminal enterprise, and that are far less susceptible to tax evasion, have implemented far more robust supply chain security solutions than the tobacco industry has.
The number of examples where big tobacco is charged with some kind of fine, felony or infringement is staggering – not just in smaller, less-advanced economies, but in leading economies; not just in isolated instances, but globally over an extended period of time. Big tobacco is a serial repeat offender, and is repeatedly being sanctioned, and agreeing to pay massive fines (in the billions), with very little