Investigation: Tobacco Giant, British American Tobacco, Caught In Intensive Smuggling, Corporate Espionage

Our investigation this week exposes the dirty business practices of the tobacco giant in Nigeria, South Africa and elsewhere.

Barely one year after WikiLeaks made public a U.S Embassy memo detailing how Anglo-Dutch oil giant, Shell, promoted perfidy in Nigeria’s oil industry, details have emerged of how British American Tobacco (BAT) has used industrial espionage to run its business.

Last year, the impunity of foreign companies in Nigeria left many people outraged after Ann Pickard, former Shell’s Vice President for Sub-Sahara Africa, was quoted as saying “the government of Nigeria had forgotten that Shell had seconded people to all the relevant Ministries and that Shell consequently has access to everything that was being done in those Ministries.”

But while Shell deservedly caught flaks for its role in oil pollution in the Niger Delta, importation of arms for the Police and complicity in the execution of environmental activist Ken Saro-Wiwa, little is known of the insidious harm done to Nigeria’s and Africa’s economic interests by BAT.

Long before WikiLeaks, the first country to blow the whistle on BAT’s unclean business practices on the continent, South Africa actually discovered a smoking gun while investigating the leading tobacco company.
In April 2002 a legal team from South African city of Port Elizabeth secretly obtained urgent court orders in three South African High Courts authorising them to raid the offices of the British American Tobacco, South African Revenue Services (SARS) and a firm of private detectives called Forensic Security Services.
The investigation that followed blew the lid on BAT’s sharp practices in the continent.
Cloak and dagger business

The cloak-and-dagger intrigue followed allegations of phone-tapping and industrial espionage levelled by Pretoria-based cigarette manufacturing company Apollo Tobacco, against BAT, the South African Revenue Services and Forensic Security Services.

BAT was accused of engaging in espionage against a competitor Apollo Tobacco. On April 9, three High Court judges ordered searches at BAT offices in Durban, Johannesburg and Pretoria as well as the offices of the South African Revenue Service (SARS) and Forensic Security Services, a private investigating firm allegedly hired by BAT.

In a 95-page court application, Apollo Tobacco, a local cigarette manufacturer, accused BAT of plotting with tax authorities and private detectives in “industrial espionage.” Apollo alleged that BAT conspired with SARS officials, using hired detectives and bugging devices, to obtain confidential information about Apollo’s business operations.

The raids on BAT offices turned up incriminating documents from seized computers.

After a week of silence, BAT denied it had done “anything that was aimed at undermining Apollo Tobacco’s legitimate business,” admitting however that they had sent allegations to the proper authorities – in this case SARS.

According to the court application, Apollo came under intense scrutiny from SARS 20 months earlier when it started manufacturing a brand of cigarettes called “Exclusive,” which it exported to countries in Central Africa.

At that time Apollo also held a license to distribute several BAT products, including Dunhill, Peter Stuyvesant, Benson & Hedges and Winfield, via its aviation service, Phoebus Apollo.

The secret surveillance of Apollo began when BAT, which had a business presence in 180 countries and was the market leader in 50 countries, formed BAT South Africa in 1999 as a result of the global merger of Rothmans International and British American Tobacco PLC.

Hennie Delport, owner of Apollo, claimed that he was approached by SARS officials and police investigators who demanded information regarding Apollo’s clientele. He also claimed SARS used the information as an excuse to withhold more than $1.3 million in VAT returns.

Mr. Delport stated that the SARS ordered several consignments of Apollo’s cigarette exports to be confiscated and destroyed  and that SARS accused Apollo of dealing in illicit products.

The Apollo boss said he was later approached by two private detectives who claimed they were hired by BAT to spy on Apollo’s operations, posing sometimes as police officers.

That the private detectives later defected to Mr. Delport because they were short-changed by their original employers at  BAT.

In an affidavit, one of the detectives admitted attending series of meetings, beginning from March 2000, organised by BAT and the SARS. The meetings were allegedly held to discuss information gathered from a phone-tapping operation carried out by the detective on behalf of BAT.

The detective claimed in the affidavit that in some cases the phone tapping was a prerequisite for payments from BAT. Apollo’s phones were bugged for as long as two months – at a time – and the tapping took place on at least three occasions.

Mr. Delport told the judges that the SARS and BAT used their reconnaissance to track aircraft transporting his goods between South Africa and warehouses in Zimbabwe.

A day after the court application was filed, the South African Civil Aviation Authority performed an impromptu inspection of Phoebus Apollo’s aircraft fleet. Two days later the authority grounded all Pheobus aircrafts on grounds that they failed the inspection.
Cross-border smuggling in Nigeria and elsewhere

Following events in South Africa, the BBC in July 2008 aired a documentary, ‘Bannatyne Takes on Tobacco’, which looked at BAT’s tactics in Africa and revealed that the tobacco multinational was breaking rules in Nigeria, Malawi and Mauritius.

The following year, the United Nations Office on Drug and Crime (UNODC) investigated the West African illicit cigarette market and published a report entitled ‘Transnational Trafficking and the Rule of Law in West Africa: A Threat Assessment’.

The report put the value of cigarettes smuggled into Africa at US$774 million.

“Most of the fraudulent importation seems to be conducted by a small group of local businessmen, who are often legal cigarette importers and distributors,” the report said.

UNODC also argued that there are only few individuals in the region with the logistical, managerial and financial capacity to organize operations of that scale.
A shot in the foot

While the UNODC report stopped short of naming the rogue companies at the centre of the illicit trade in West Africa, it was BAT itself that unwittingly exposed its own underbelly when some internal documents tumbled out of the British American Tobacco Document Archive (BATDA).

The same way the US Embassy memos leaked by WikiLeaks were never intended for the public eye, so are the BAT’s internal documents that have now come to haunt the tobacco giant in the different countries of its operation.

The internal corporate documents, made public through two US litigation settlements, provide evidence of the company’s complicity in cigarette trafficking across the African continent.

Available documents suggest smuggling has been an important component of BAT’s business strategy mainly to compete with other transnational tobacco companies and circumvent local import restrictions.
In the case of Nigeria, minimising taxation was described as a motive BAT engage in contraband tobacco trade.

Though the multinational publicly asserts that “British American Tobacco companies do not smuggle,” and “do not condone smuggling,” or “encourage or collude with others to smuggle on our behalf,” its internal documents however show otherwise.

The documents describe how BAT worked through distributors whom they contracted into the trade. The distributors, acting as middlemen, purchase cigarettes from BATUKE (BAT UK & Export) and then supplie them to “transiteers” – a term used for smugglers that physically transport contraband across borders.
One of them was a distribution firm called Sorepex and later, another called Gerconal Holdings.

A key function of distributors was to insulate BAT from direct contact with ‘transiteers’, thus reducing the risk of detection and prosecution. One of the document described how Sorepex, for example, “provided cover” for BAT in some fairly shady business.

In terms of estimated value, internal documents describe BATUKE’s transit business in Niger Republic was worth about £14 million in 1989 and £10 million in Nigeria in 1990.
Cigarette as matchsticks

To avoid detection of smuggled cigarettes between Niger and Nigeria, Sorepex reported in one document that “Direct imports to Nigeria would be through Mr Adji… who would disguise the cigarette importations by calling the shipment something else, e.g. matches …”

Plans to conceal cigarettes among other merchandise and falsify documents on the origin of the stock were made known to BAT. Another internal document translated from original French revealed that sales, departing from Malabo, capital of Equatorial Guinea, to North Cameroun and Chad were carried out through three ‘transisteers’ namely Sodisa, Mouchili and Bogno.

“For the first time, Bogno will buy 300 cartons, this is the capacity of his truck, taking into account the other merchandise which will ‘hide’ the cigarettes,” one paragraph read in the documents.

Another paragraph quoted a BAT official saying that “Each time, I will ask M & B [Mouchili and Bogno] to sign a document testifying that the cigarettes have really been exported from the North. I will countersign this document which will  enable BAT to pay them—via Sorepex.”

A similar method of concealment was used in the supply routes for State Express Filter King (SEFK) cigarettes to Sierra Leone.

“In the three weeks, Bah (smuggler) had sold 300 of the 420 cases. Next SEFK will be sent via Conakry, instead of via Dakar (where two borders had to be crossed). Transit Conakry/Freetown would be by lorry … Later they want BHSF [Benson and Hedges brand], which would be stuffed in same container, but documents/cases, would have to be marked ‘in transit’…” part of the memos read.

More documents describe BAT’s relationship with shadowy transporters in Sudan “who sell their gum Arabic (adhesive for cigarette papers) in Bangui” and those in Birao (a city in Central African Republic) who the internal BAT document describes as “indispensable in negotiating border  crossings”.
Gravy train

Though BAT in its own words describe its relationships with ‘transisteers’ as a “gravy train”, the multinational was not always sitting pretty.

In Djibouti, failure of prepaid contraband to arrive raised tension over who should incur the loss. Transiteers threatened to cease moving BAT’s contraband.

In Guinea, BAT became concerned that its ‘transiteers’ were also smuggling competitors’ products. The concern followed earlier suspicions that a BAT employee based in Guinea was also smuggling Marlboro cigarettes.

In response, BAT established its own staff on the ground to do what the smugglers were doing. As described by BAT staff in an internal memo, “we are continually improving our knowledge of the transit end markets and taking more control of the business. Steps are being taken to diminish our reliance on Sorepex”.

Nevertheless, the tobacco multinational was clever enough to see the need to retain Sorepex.
“BAT has staffed up in West Africa to the point where there is duplication of efforts between Sorepex and BAT (UK&E). Our objective now is to preserve the façade that Sorepex represents between us and the sensitive markets of Togo, Benin, Niger and Equatorial Africa, but at the same time, enable the BAT field force to take over the management of this important business,” an interna memo seen by PREMIUM TIMES read in part.

In Nigeria, BAT has not only engaged in smuggling to minimise duties, it has relied heavily on under-invoicing.

“Kool is considered to be the best B&W product offering for the Nigerian market. … 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,” one memo reads.

Outraged by BAT’s dirty business practices in Africa, Yussuf Saloojee of National Council Against Smoking, South African-based NGO is pressing for African governments to launch criminal investigations into BAT and its involvement in cigarette smuggling.

“The days when they can march in with their colonial arrogance and treat Africa like some lawless frontier are over,” he said. “Africa has enough problems without multinational corporations undermining the stability of our governments and national policies.”
Infiltrating governments

Industry observers said that in the same manner BAT was involved in corporate espionage in South Africa, the tobacco multinational has infiltrated several enforcement agencies in Nigeria including the Nigeria Customs Service.

A few years ago, the tobacco giant, donated patrol vans and made other contributions to the Customs training school.

The UNODC also found that the smugglers “ manage the smuggling across porous borders within West Africa, often with the complicity of corrupt  customs officials.”
Tyranny in Cameroon

In Cameroon, BAT is believed to have orchestrated the unjustifiable delay by the Customs of a competitor’s raw materials at the seaport, causing the competitor huge losses in product damage. On April 29, 2005 a Cameroonian newspaper Aurore Plus raised the alarm that BAT had obtained a fraudulent court order “through under-the-table negotiations with the judiciary and the customs”.

The paper said that BAT had turned itself into an inquisitor by influencing authorities to hound competitors under various guises.

On April 5, 2005, BAT had through its lawyer, Barrister Chrétien Boumo, filed a motion asking the Ndokoti, Douala magistrate’s court to allow it (BAT) use all legal means available to seize all quantities of YES International and MEHR GOLD cigarettes found in the Cameroonian market.

BAT claimed that the packets and sticks of the said YES International and MEHR GOLD cigarettes were identical to those of Benson & Hedges cigarettes.

On April 15, 2005 Magistrate Réné Lucien Eyango authorised BAT to use all bailiffs or public officers with the assistance of one Mr. Ndengoue Noumbissi Jean Marie a technical expert and if necessary the assistance of the forces of law and order to seize the competitors’ products found in the market.

The newspaper exposed BAT’s tyranny in Cameroon, saying the multinational was using the court to fight the liberalisation of Cameroon’s market which had seen the entrants of other brands.

Aurore Plus further proved BAT’s lawlessness by revealing that contrary to BAT’s claim that its brands were protected by OAPI (Organisation Africaine de la Propriété Intellectuelle) regulations, YES and  MEHR GOLD also had OAPI protection as they had been registered with the said organisation since 1991.

This registration and protection, the paper revealed, had enabled the said YES and MEHR GOLD to be marketed in other OAPI affiliated countries as Burundi, DR Congo, Djibouti, Algeria and Angola where Benson & Hedges is also marketed without any problems.
BAT’s response

When the BAT Nigeria office was confronted with the findings of our investigation and asked to respond to the individual findings, the company replied with a blanket answer, pretending that it had always played by the rules.

“British American  Tobacco ( Nig.) Ltd,  is a law abiding and responsible company and does not and will not  participate in or condone  illegal and unethical activities,” Oluwasoromidayo George, Head of Corporate Social Responsibility & Communications for BAT West Africa Area. said.

Ms George said illegal trade in tobacco products was indeed harming BAT’s business.

“Our battle against illicit trade includes ensuring that quantities we supply are consistent with legitimate demand, cutting off supplies to any customers knowingly or recklessly involved in illicit trade, helping enforcement agencies to spot fakes, signing agreements with the  Nigerian customs for joint action and sharing information with the government agencies,” she said.

BAT also claimed it “believe all businesses should operate on a level playing field, abide by all laws and employ the principles of business ethics and self-regulation where no laws exist.”

But contrary to Ms George’s claims, facts at this newspaper’s disposal clearly suggest that BAT is serial violator of laws and business ethics.

Source: Saharareporters.com

Link: http://saharareporters.com/news-page/investigation-tobacco-giant-british-american-tobacco-caught-intensive-smuggling-corporate-

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