Against this background, BAT’s own records seem to suggest it was physically exporting 53 times more cigarettes to China than it was officially declaring for import.10 So, for every container it declared, 53 others appear not to have been declared to the authorities and were instead smuggled into the country. Little wonder, then, that BAT viewed China as ‘one of the larger profit centres’,11 with an apparent 25% of BAT’s profits coming ‘from transit trade to China’12 (and remember, ‘transit trade’ is an industry euphemism for smuggling).
It seems it wasn’t just BAT plying the black trade – PMI apparently was too, as BAT itself claimed: ‘… the PMI model places an intermediary between PMI Asia and the transit traders. We have two objections. First the transit trade [contraband] still originated with Philip Morris Asia and is controlled by that company. That is similar to the present situation with BAT Hong Kong. The second objection is that the intermediary adds another level of profit absorption and is harder to control. The apparent distancing has little effect since the business is transit [contraband] trade. BAT group can pretend ignorance that its cigarettes are being distributed through the transit trade as much and as justifiably as Philip Morris can.’13
This example from the late eighties may admittedly be relatively old. But it does raise this question: If indeed BAT had managed to secure 25% of its profits ‘from transit [contraband] trade to China’,14 and if one were to give it the benefit of the doubt and assume for a moment it no longer runs a contraband supply chain in China, how has it compensated for the loss of this quite significant chunk of its profits? And if it could do this with some impunity in China, what has it managed to pull off in other countries?
It didn’t end there. Smuggling has proliferated in the industry, decade after decade, country after country.
In the nineties, evidence suggests that BAT and PMI ran smuggling rings in Colombia,15 and paid $1,7 billion in criminal fines and civil restitution for their role in smuggling schemes in Canada;16 11 PMI executives were charged with tax fraud in Italy to the tune of $400 million;17 PMI was accused of smuggling cigarettes into South Africa;18 and a BAT manager was convicted of taking bribes from smugglers in Hong Kong.19
In an interview, Les Thompson, a sales executive who worked for RJ Reynolds, recalled the situation in Canada after the government raised the tax on cigarettes sharply: ‘Really the options were limited. The no-brainer in the equation becomes: We have to enter the black market. We have to enter the black market. We’ve got to pursue this tax-free environment through the illegal smuggling efforts back into Canada.’20
In the 2000s, The Guardian newspaper exposed how BAT benefitted from smuggling practices in both the UK and beyond;21 racketeering charges were filed against BAT in Colombia;22 The Guardian newspaper reported that court documents show that as much as $200 million in smuggling profits allegedly made its way to Geneva in one year alone;23 Imperial was accused of smuggling as much as 65% of their packs onto the UK market;24 Imperial and Rothmans were fined $1,15 billion for smuggling in Canada;25 a BBC documentary exposed how BAT was seemingly breaking the rules in Nigeria, Malawi and Mauritius;26 more than 20 000 internal documents highlighted how PMI’s Gallaher set up a trading ‘environment’ conducive to illegal activity;27 a media report based on internal industry documents attributed extensive smuggling to BAT in West Africa28 and to smuggling in Sudan, Birao, Nigeria,29 as well as under-invoicing in Nigeria.30
According to a BAT Nigeria document: ‘General trade [illicit] movements to this end market will remain a priority throughout the period. 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.’31
In 2000 the European Commission launched an investigation into contraband American cigarettes on the European market, and filed a lawsuit against big tobacco.32 The charge sheet filed is simply astonishing: ‘… Controlling entire smuggling operations – an ongoing global scheme to smuggle cigarettes, launder the proceeds of narcotics trafficking, obstruct government oversight of the tobacco industry, fix prices, bribe foreign public officials, conduct illegal trade with terrorist groups and state sponsors of terrorism, engaging in organised crime, money laundering …’33
Around the same time The Guardian tells us that BAT issued a profit warning to its shareholders that profits were expected to plummet by £500 million as it was being forced to clamp down on illegal trafficking.34 (That sounds remarkably like an admission in and of itself.)
Big tobacco settled the case on terms that are simply staggering, which included having to compensate the EU for the tax revenues lost as a result of the smuggling of its packs. PMI’s liability under the settlement? $1,250 billion. Read that again: PMI had to pay $1,250 billion in compensation for the tax losses caused by the smuggling of its packs. JTI had to pay the EU $400 million (paid off over a period of 15 years), Imperial $300 million (paid over 20 years), and BAT $200 million (to be paid over 20 years, with the last payment due in 2030).35 That’s a lot of smuggled packs.
Rather tellingly, almost immediately after the settlement agreement was signed, the volume of cigarettes shipped through Antwerp, the hub from where investigators believed the contraband cigarettes were being shipped, decreased from 72 billion cigarettes to 2 billion.36
Just as an aside, this is on top of an earlier settlement agreement with a number of US states to compensate for the healthcare crisis tobacco had caused, where big tobacco was also forced to pay $206 billion in financial compensation.37
Did it stop there? No. Big tobacco seems to have been acting with impunity even more recently.
In the decade since 2010, a smuggling hub allegedly run by JTI in Russia and the Middle East was exposed;38 BAT reportedly took over from its transiteers in Djibouti and Guinea to start smuggling itself;39 Spain launched a lawsuit against PMI for involvement in organised crime in pursuit of a ‘massive, ongoing smuggling scheme’;40 Canada filed a smuggling and racketeering lawsuit against RJ Reynolds, to the tune of $1 billion (the case was dismissed only on a technicality);41 PMI was sued for $3 billion in damages for smuggling, money-laundering, conspiracy and racketeering in Colombia (claims it denied);42 the EU launched a probe into JTI for a cigarette deal that is believed to have aided Syria;43 Ecuador filed a racketeering charge against PMI, BAT and RJ Reynolds;44 BAT was fined £650 000 for oversupplying tobacco in the EU by as much as 240%;45 BAT was accused of having bribed a politician to ensure that a cigarette track and trace tender was not awarded in Kenya;46 PMI was fined $3,15 billion for tax evasion in Thailand;47 PMI and BAT were fined $260 million for illegal cigarette hoarding in Korea;48 PMI was slapped with a lawsuit accusing it of fraud and corruption in relation to the implementation of its traceability solution Codentify in Buenos Aires;49 PMI was charged with tax evasion in Thailand and the Philippines, facing 272 counts of fraud and a potential penalty of $2,29 billion;50 and by 2017 BAT was being investigated by the UK Serious Fraud Office for corruption and bribery in (amongst others) Kenya, Burundi, Rwanda and Comoros Islands51 (that investigation had, at the time of writing, not yet been concluded). Oh, and BAT subsidiaries have also been fined or investigated for tax evasion or fraud charges in Australia, Korea, Vietnam, Bangladesh, and Russia.52
In 2018, we know that South Africa’s taxman reportedly found that BAT had made ‘misrepresentations’ and ‘false declarations’ relating to the use of rebates and purported exports, and the non-disclosure of material facts, and slapped them with a R214 million ($15 million) assessment for duty evasion.53
Then in 2019, the BBC exposed evidence of BAT’s illegal operations in the Democratic Republic of Congo, in particular on the back of information provided by whistle-blower Paul Hopkins.54 Hopkins – a former soldier in the Irish Army’s special forces – worked for BAT for 13 years in Africa, where he says he ran security and anti-smuggling operations, and claimed he arranged for the payment of BAT’s bribes. He fell out with the company and turned whistle-blower. In an interview with The Guardian, Hopkins explains why he believes