'Defensive and reactionary' Imperial Tobacco face hard questions at AGM
Embargo: 00:01, Tuesday 5 February 2002
Tobacco to face hard questions fromshareholders over profit from smuggling.
Despite increased profits this year, Imperial Tobacco faces a trickytime in the coming months as concerns continue to grow regarding its allegedcomplicity in profiting from tobacco smuggling, and the revelation that thismight leave Directors open to criminal charges. The Company's reputation isstill suffering as a result of the mauling it received from a House of CommonsSelect Committee, which described it as “defensive and reactionary”, and itsChief Executive Gareth Davis's promises as “worthless”.[1] To mark Imperial'sAnnual General Meeting in Bristol on 5 February, ASH is casting an eye over the company's conductin the past year, and asking pressing questions that should concernshareholders.
It takes some doing to be singled out asthe tobacco company with the worst record on the health risks of smoking - thecompetition for this title is really very strong. Shareholders have a right toworried about the positions which have been taken by Imperial.
While Imperial crows about its increasedprofits and market share, it's important to remember where these come from. Allof the increase has come from overseas sales. Over half of Imperial's salesoverseas return to the UK as smuggled goods - costing the UK taxpayer billionsin unpaid tax.. Imperial are still not taking any effective measures to stopthis, even though they claim to be opposed to cigarette smuggling. They claimthat what happens to their cigarettes after they sell them is not theirproblem. However, our advice from lawyers is that if a tobacco company sellscigarettes to a wholesaler, knowing that they will be used in a smugglingoperation, then they are breaking the law themselves.” [2]
Smuggling
Evidence showing the extent towhich Imperial benefits from cigarette smuggling is overwhelming. The companyhas exported enormous quantities of two of their brands - Regal and Superkings- to countries such as Cyprus, where the market for these brands is tiny. Thesecigarettes are then smuggled back into the UK where they appear on the blackmarket - sometimes within a week of their original export. Over half of Customsseizures in the UK are of these two brands, and on the basis of Customs'figures for seizures, almost two thirds of Imperial's exports return to the UKas contraband - around 13 billion cigarettes a year.
Connolly said:
“There is just no credibleway that Imperial can't know that this is happening. Smuggling contributes tensof millions of pounds to their profits every year, and any well-run business isbound to notice if they are exporting huge quantities of products which thenvanish when they reach their destination. ASH's view is that they are turning ablind eye to a criminal practice which helps their export figures. Imperialhave to explain why they are not taking the steps they could to stamp out thistrade. They claim to be anti-smuggling. It's time for them to back this up withaction.
“
Questions for the Board:
What are the company'sDirectors doing to end the large-scale smuggling of their products?
Will the Board agree to set upan independent inquiry into the smuggling of their products
ASH estimates that over half oftheir overseas profits are derived from cigarettes which end up being smuggledback into the UK. If Imperial Tobacco disagree with this figure, what is theirestimate?“Thesooner the DTI announce the result of their inquiry and take strong actionagainst any guilty parties the better. If DTI criticises of the company'sconduct, the Board should resign in disgrace won't beholding my breath.”
Select Committee
In 2000, the House of CommonsHealth Select Committee held an inquiry into the Tobacco Industry. The conductof all of the main tobacco companies was criticised in the Committee's report,but Imperial was singled out for special criticism. MPs were angered by therefusal of its Chief Executive, Gareth Davis, to admit that smoking causedserious diseases, and by the company's refusal to make its internal documentspublic - a decision they described as “lamentable”. The Committee said that“Tobacco companies should produce the least harmful product possible” but that,“we are totally unconvinced that Imperial Tobacco can be committed to producingsuch a product while its public stance is to refuse to accept that cigarettesare intrinsically unsafe”. The Committee also criticised Davis for his lack ofco-operation, saying that his “promise to co-operate with the Committee in whatways he could proved worthless”.
Connolly said:
“40 years after we found outjust how dangerous smoking is, Imperial tobacco are still trying to wriggle outof admitting the quantity of disease caused by their products. This would belaughable were it not for the fact that Imperial's cigarettes kill almost50,000 people in the UK every year. If the company won't admit the basic factthat cigarettes kill, it's difficult to believe anything else they say. All ofthis shows why tobacco companies need to make their internals documentsavailable to public scrutiny - to show what they knew about the dangers ofsmoking and when.”
Questions for the Board.
Does Gareth Davis regret hisreluctance to assist the Select Committee? How much does he feel his stance,and that of the company, on these issues has harmed their reputation inWestminster and beyond?
ENDS
John Connolly 020 77395902 (office); 07702 817477(Mobile)
ISDN available
For more information on how smoking affects theskin and a person's appearance see ASH fact sheet, ‘
