Big Tobacco, Big Time Smuggling

By Duncan Campbell and Kevin Maguire

Kenneth Clarke, currently embroiled in an increasingly acrimonious bid for the Tory leadership, today faces a major embarrassment through his boardroom connection with the cigarette manufacturer British American Tobacco.

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                                                    New evidence from a whistleblower
                                                    suggests that, during Mr Clarke's tenure
                                                    as deputy chairman, the controversial firm
                                                    has been using a Swiss subsidiary and
                                                    bank account secretly to control a
                                                    worldwide smuggling network.

                                                    The whistleblower is a former director of
                                                    the firm's offshore agents in the
                                                    Caribbean. He says: "BAT ran the whole
                                                    show" and has handed over a sheaf of
                                                    documents backing his claim.

                                                    Because of the high tobacco duties levied
                                                    by most governments, there is a big
                                                    market in smuggled cigarettes on which
                                                    no taxes have been paid and which can
                                                    be sold cheaply under the counter. Firms
                                                    like BAT can make large profits and
                                                    expand their sales if cigarettes that they
                                                    manufacture and export duty free are
                                                    purchased by smugglers.

                                                    BAT insiders estimate that up to a third of
                                                    BAT's £1bn annual profits in recent years,
                                                    have been the fruits of cigarette
                                                    smuggling, not only in Latin America, but
                                                    mainly in China, as well as Africa and
                                                    Asia, and such markets as Vietnam,
                                                    where Kenneth Clarke returned from a
                                                    recent BAT trip seeking official entry to
                                                    the Vietnamese market.

                                                    The new evidence has been obtained by
                                                    the International Consortium of
                                                    International Journalists (ICIJ), a
                                                    US-based group of investigative
                                                    journalists, linked to the non-profit Centre
                                                    for Public Integrity in Washington, who
                                                    have published a series of exposures
                                                    accusing BAT of black marketeering.

                                                    Mr Clarke responded to those allegations
                                                    last year with an ambiguous admission
                                                    that BAT does not actually seek to
                                                    prevent smuggling. He said the cigarette
                                                    firm faces a dilemma because it wants to
                                                    keep up with its rivals. He wrote in the
                                                    Guardian: "We act, completely within the
                                                    law, on the basis that our brands will be
                                                    available... in the smuggled as well as the
                                                    legitimate market."

                                                    But the latest material shows the
                                                    company going much further. The
                                                    documents may be a "smoking gun"
                                                    because they suggest BAT not merely
                                                    colluded with smugglers in the past, but is
                                                    centrally organising the process and
                                                    collecting hundreds of millions of pounds
                                                    worth of black market proceeds.

                                                    This raises the possibility of criminal
                                                    proceedings against some BAT
                                                    executives, while laying Mr Clarke open to
                                                    charges not only of foolishly lending his
                                                    name to a misbehaving company, but of
                                                    misleading the Commons.

                                                    Mr Clarke, who became £100,000-a-year
                                                    deputy chairman in 1998, assured
                                                    parliament's all-party health committee in
                                                    February 2000 that as a member of the
                                                    BAT board audit committee he had
                                                    investigated the allegations. He said: "I ...
                                                    seek to ensure that the company follows
                                                    the highest standards of probity".

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