30^th October 2000 ­immediate release

Responding to the news that the Department of Trade and Industry launched an investigation into British American Tobacco over its role in global cigarette smuggling,Clive Bates, Director of ASH said it was a landmark victory in the long waragainst tobacco smuggling:

“It's a bold and powerful move by the government andit will be a turning point in the battle against large-scale cigarettesmuggling.  BAT's fingerprints appearall over the massive global illegal trade in cigarettes ­ and once theauthorities properly understand the real causes and commercial drivers ofsmuggling, we will be a long way towards tackling the problem.

“The DTI has investigated serious large-scalemisconduct before, but this time it's not just a over-mighty individual rogue,but an entire business operation under scrutiny, involving dozens of topexecutives and hundreds of marketing staff. Smuggling probably contributes 300 to 500 million pounds to BAT's bottomline.”

ASHmade three suggestions for the immediate way ahead.First, the DTI should widenthe investigation to include the British manufacturers, Imperial Tobacco andGallaher.  ASH today publishes

“Questions need to be asked about why thesecompanies export so many cigarettes to countries where there is no market for them­ often with UK health warnings.  Why dothey export billions of cigarettes to countries that are better known ascentres of organised crime than for their preference for smoking Britishbrands? There is a three billion pound hole in the government's accounts andthe government should force Gallaher and Imperial to answer the same questionsas BAT,” said Bates.

Second,while the investigation continues, BAT Chairman Martin Broughton should stepdown as the Chairman of the Industry group of the UK-China Forum.  Sir David John KCMG, Chairman of BOC plc,who is standing in for Broughton for this year only, could permanently replacehim.

“We can't have a rogue business sponsoring outlawbehaviour in every corner of the globe, while its executives draw comfort fromtheir membership of the cosy elite of the business establishment,” saidBates.  “The evidence shows that BATorchestrated a massive smuggling operation through Hong Kong into China. Wereally see no place for anyone from BAT as a figurehead in British traderelations with China.”

Third,BAT Deputy Chairman, the Rt Hon. Kenneth Clarke QC MP, should resign todistance himself from BAT and donate his £100,000 1999 pay from BAT to cancerand heart charities.

“Ken Clarke has been acting as a human and friendlyface for BAT by cheerfully denying everything but never bothering to lookproperly at the evidence.  Even thoughClarke's not involved in the smuggling, he's been an important part of thecover-up and he should go,” said Bates. “If Clarke ever wants to lead a political party, he would be welladvised to put a large expanse of clear blue water between himself and BAT.”

ASH applauded Secretary of State for Trade and Industry Stephen Byers. In his speech to the WTO (pdf) in Seattle in November 1999, Byers said:

“If it weretrue that globalisation was about the unregulated power of cynicalmultinational corporations coercing Governments and playing off one countryagainst another - then I would be the first to call a halt."

ASHbelieves Byers' statement very aptly applies to BAT's activities in Latin America and Asia.

“The government has often been accused of beinguncritically pro-business at the expense of everything else, but here is aclear example of a Minister prepared to put principle before dirty profits.

“This is the Select Committee at its best ­ taking onan issue of great public importance and making a well-argued case to encouragethe government to respond constructively.”

Developments and background

ASH has maintained all relevant information, developments and press coverage on our website at www.ash.org.uk/current-policy-issues/taxation-smuggling/smuggling.

An easy guide to the evidence: ASH summarized the arguments in a short letter to BAT's Deputy Chairman, Rt Hon Kenneth Clarke QC MP. (Also see Clarke's petulant response).  More comprehensive evidence was provided as a submission to the Health Select Committee.

WHO Framework Conventionon Tobacco Control ­ smuggling protocol. Governments are negotiating a treaty on tobacco control. In Geneva 16-21October 2000 over 90 countries expressed their support for tough inter-governmental action against smuggling to be built into the convention. See FCTC official paper A/FCTC/INB1/2 and ASH briefing on FCTC and smuggling. For further information, see a recent BMJ paper How cigarette smuggling can be reduced.

DTI investigation: these are authorised under the Companies Act.

BAT's internal investigation: BAT agreed to establish an internal investigation – but the lawyers it has appointed (Cravath Swaine and More, New York) are also defending BAT in its US-based racketeering action over Colombian cigarette smuggling

UK-China Forum:  Martin Broughton, Chairman of BAT, was appointed to Chair the Industry group of the UK-China Forum. Its most recent press release (Oct 2000) explains that another captain of industry temporarily replaces Mr. Broughton.

Treasury Select Committee: Treasury Select Committee will question HM Customs and Excise on tobacco smuggling (and other matters) on Wednesday 1^st November.  This Committee has the opportunity to recommend that Gallaher and Imperial Tobacco be added to the DTI’s investigation of BAT.  ASH has submitted evidence to the Committee based on the report of a 6-month investigation into UK cigarette smuggling.

Contacts:

CliveBates (ASH): +44 (0)20 7739 5902 (office) +44 (0)468 791237 (mobile)