TELITA SNYCKERS: How BAT’s chickens came home to roost

In the past week, a spate of reports, including from the BBC and the University of Bath, has detailed how British American Tobacco (BAT) ran a spy ring in SA.

Of course, none of this is new – we’ve been writing about it for aeons now. But because so much time has lapsed since this story initially broke in SA, perhaps a recap is in order.

Years ago, BAT took off the gloves in a bid to claw back market share from competitors who emerged selling the same product, but cheaper. 

BAT’S strategy was simple: disrupt its competitors to the point of making it impossible for them to operate. 

To do this, BAT relied on a security firm — Forensic Security Services (FSS) — to co-ordinate activities, under the guiding hand of British American Tobacco SA’s (BAT SA’s) anti-illicit trade head. But it also used a series of in-place “agents” at its competitors’ businesses even as it co-opted law enforcement agencies and deployed a shared agent with the State Security Agency (SSA): triple agent and honey trap Belinda Walter.

All of this was monitored from BAT’s global headquarters, Globe House in London.

One former employee explained it as follows: “Our primary work description was to spy on competitors and disrupt business operations on behalf of BAT SA, [which] was fully aware that FSS was obtaining information illegally, and these (sic) included obtaining recorded conversations.” 

Damning minutes from one meeting between FSS and BAT asked: “Can we utilise current network to ‘set up’ any one (sic)?”. Another minute described how the companies aimed to “cause a substantial rift between the distributors. This can be done through means of jealousy or false reports.”

At this point, the evidence is unambiguous that BAT ran an illegal corporate espionage ring in this country, with the assistance from friends at the SSA. 

The evidence is also unambiguous about a direct line between its agent, Walter, and false allegations of impropriety at the SA Revenue Service (SARS). And the evidence is unambiguous about payments to its agents being structured in such a way as to make them virtually untraceable — apparent money laundering. 

When the story first broke years ago, BAT SA’s CEO expressed his “shock” at the allegations and committed to appoint a law firm to investigate. 

But that was in 2016. Ten months after BAT appointed global law firm Linklaters to conduct an investigation, the media storm died down and BAT announced that it had simply cancelled the brief for Linklaters “for matters of efficiency”. 

Linklaters was ostensibly replaced by law firm Slaughter & May. But it was only when some of the independent manufacturers decided to take BAT to court and a whistle-blower released a trove of documents exposing BAT’s dirty tactics, that the company — now squarely in the media spotlight — was again spurred into action. 

So this time, it hired Norton Rose Fulbright – the firm that also, coincidentally, was used by BAT’s auditors, KPMG. 

Today, several years and at least three legal firms later, BAT has still not breathed a word publicly of what it found, or what it did to ensure criminal practices like this are not repeated either locally or on a global scale. 

BAT has simply refused to disclose copies of its reports. It states these are “legally privileged and [were] prepared for the purpose of BAT obtaining legal advice. The contents of the report may be relevant to ongoing investigations and litigation. BAT has made disclosures to the appropriate SA and other law enforcement authorities.”

As if the tobacco giant’s attitude to transparency wasn’t entirely clear, it also simply ignored applications for reports and documents by the FM under the Promotion of Access to Information Act.

What makes this case all the murkier is that even while BAT was seeking to direct law enforcement efforts to target its competitors, its own hands were by no means clean. 

At the time, it had been issued with two SARS tax assessments to the tune of R2bn and R214m respectively. And overseas, it was also facing allegations of smuggling in Colombia, Nigeria, Malawi, Mauritius, Sudan, the Central African Republic, Djibouti, Guinea, Ecuador, Kenya, Burundi, Rwanda and the Comoros; and of evading taxes in Australia, South Korea, Vietnam, Bangladesh, Russia, Brazil and Egypt. It has been issued with a Dutch tax assessment to the tune of $2.1bn.

The mystery death of investigations into BAT

More recently, money laundering and corruption investigations were launched by the UK’s tax agency, HMRC, and the European Commission’s Serious Fraud Office (SFO).

The SFO says any decision not to proceed with a prosecution is generally informed by one of two considerations: either there isn’t enough evidence, or it’s not in the public interest to prosecute. 

In the end, the SFO called off its investigation into BAT. But it’s hard to see how this could truly be due to a lack of evidence, given the plethora of evidence that directly and unambiguously implicated BAT. Perhaps, then, the SFO decided it was “in the public interest” to can the investigation — this seems a more likely reason, with companies like BAT being almost too big to fail. 

And yet last week, BAT said it “emphatically rejects” the “mischaracterisation of our conduct” by some media outlets.

“Our efforts in combating illicit trade have been aimed at helping law enforcement agencies in the fight against the criminal trade in tobacco products,” it claimed. “Acting responsibly and with integrity underpins the foundations of our culture and values as a company … BAT is committed to the highest standards of corporate conduct and transparency wherever we operate.” 

That has been the line it has stuck to. But this requires some serious suspension of disbelief.

If indeed that commitment was true, then BAT should come clean. 

It should take us into its confidence and disclose what exactly its various legal firms uncovered, what evidence was disclosed to which law enforcement agencies, what policy changes it introduced to ensure that its association with illegal activities aren’t repeated and what disciplinary steps it took against staff with dirty hands.

Instead, history teaches us that cases against BAT all tend to die a quiet death, perhaps because, as an industry lawyer once noted, the way big tobacco wins litigation is not by spending all of their money, but “by making the other son of a bitch spend all of his”. 

It means BAT managed to pull off something of a silent coup. Any South African can tell you the value of political patronage. Buying power and ingratiating yourself with the very people who are supposed to investigate you makes you virtually Teflon. 

As we flit from scandal to scandal and are assailed by new revelations of yet more outrageous capture and corruption, it’s too easy for individual instances to fall off our radar screen and fade from our consciousness. This is what happened to BAT’s scandalous behaviour. 

If there is any justice, BAT should be held to account for its dirty-handed tactics. Fortunately for the tobacco behemoth, SA’s law enforcement agencies are far too busy harassing kindly old men growing cabbage on their sidewalks to be bothering with multinationals. 

Snyckers is an independent illicit trade expert and former executive at SARS whose clients include the IMF. Her exposé on big tobacco, Dirty Tobacco, was released in May 2020 and shortlisted for the Sunday Times CNA Literary Awards.