Sunday Times

BAT’s smoke and mirrors war on rivals

‘Agent’ says tobacco giant uses illegal network of spies


SENSATIONA­L recordings and documents show how South Africa’s largest JSE-listed company, cigarette giant British American Tobacco (BAT), appears to be committing “industrial espionage” on a grand scale, running a network of “agents” placed to spy inside rival organisati­ons.

This evidence, uncovered as part of a year-long Business Times investigat­ion, raises questions about the tobacco company’s ethics, and highlights shady dealings that are understood to have been reported to the authoritie­s in SA and the UK, where it is headquarte­red.

One agent, who was placed in a senior position within BAT’s rivals, said that BAT’s “worldwide” practice of making secret payments to agents could be considered “internatio­nal moneylaund­ering”.

“They had a deal to pay me for industrial espionage, and may I say I’m not the only one in our little circle. There are [government intelligen­ce agents] who have left the state, and gone to work for BAT,” said the agent.

The claim that BAT was involved in spying on rivals is corroborat­ed by affidavits, audio and video recordings, copies of financial transactio­ns and the accounts of five cigarette manufactur­es, a state informant, sources close to the SA Revenue Services and one of BAT’s senior agents.

While BAT ostensibly set up these networks as part of its battle to thwart the R5-billion illegal cigarette industry, it seems the tobacco giant oversteppe­d the mark, and now may have broken a number of laws in South Africa and the UK.

In return for informatio­n, officials from BAT’s London headquarte­rs allegedly gave their South African agents Travelex cards, which were registered in the UK under different names, then recharged with cash over the internet so they could be used at South African ATMs.

One agent said: “I’ve been in the room where [a top BAT executive] calls [another] and asks him for the PIN number because he’s forgotten it. On one occasion, he was in South America, on another in Turkey, so they are doing it internatio­nally.”

Business Times has a recording of a conversati­on between a senior BAT official and one of its secret agents, in which the tobacco executive tells the agent not to “sell us out” by spilling the beans on the spying.

Speaking of the Travelex payments, the BAT official said: “I would not volunteer [during your meetings with the authoritie­s], unless you are legally forced to, where the sources come from.”

“We will never reveal who we pay because of the nature of the business and the danger to the individual­s . . . I am not going to reveal that because it is a lifethreat­ening issue,” he said.

The tobacco executive said the UK tax authoritie­s were now investigat­ing these payments.

“I would have to suspect they have put two and two together.”

One SA government figure, who knew of this practice, described it as an “al-Qaedastyle­d” method of payment.

“BAT’s anti-illicit [team] spoke about money laundering [in the cigarette trade] and the links to organised crime . . . but here you have them using what the financial action task force calls alternate payment methods, undeclared transactio­ns designed to avoid being picked up by the authoritie­s,” he said.

These revelation­s would come as a major embarrassm­ent for a company that has been fighting hard to project an image of itself as the “clean” operator in an industry under massive pressure as low-cost cigarette manufactur­ers increasing­ly muscle in on their tobacco markets.

In meetings with Business Times, BAT’s South African MD, Brian Finch, denied any knowledge of spying on rivals and of payments to “agents”.

The tobacco company’s London head office refused to respond to detailed requests for comment. It provided only a blanket statement that it “denies current allegation­s of any involvemen­t in industrial espionage or any illegal activity”.

In particular, BAT’s head office did not respond to questions about the Travelex payments or how many “agents” it was paying across the globe.

When asked, the SA Revenue Service (SARS) said it “does not wish to comment on this”.

SARS Spokesman Adrian Lackay said: “Hypothetic­ally, if such a practice exists [and] depending on certain factors, it may suggest the presence of elements of tax evasion, exchange control violations and moneylaund­ering.”

Finch confirmed, however, that SARS had launched an audit into BAT’s South African operation. This audit followed concerns that BAT may have used “sophistica­ted internatio­nal structures” to reduce its tax bill.

However, Finch said BAT South Africa was “looking forward to this [audit] because if the same process is going to be followed for every manufactur­er, then that is great”.

Finch would not reveal how the company structured its royalty and other payments to its UK parent, however, saying the local company was “a private entity” that did not have to disclose that.

 ??  ?? TIGHT HOLD ON THE REINS : Caxton CEO Terry Moolman
TIGHT HOLD ON THE REINS : Caxton CEO Terry Moolman

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