Sunday Times

BAT’s bid to stub out spy saga

Tobacco giant believed to be negotiatin­g out-of-court deal


TOBACCO giant British American Tobacco (BAT) is scrambling to avoid having to come clean in the face of new evidence that it hired a network of agents to spy on rivals.

Claims of cross-border industrial espionage against BAT continue to mount, and evidence has now emerged which links the head of BAT’s global anti-illicit tobacco programme, Ewan Duncan, to an SA Revenue Service (SARS) probe into the payments made to these informants. One government official, who knows of this practice, described it as “al-Qaeda styled” payments.

One of the companies that claims that BAT spied on it is Carnilinx, a budget-brand tobacco producer run by Adriano Mazotti, a benefactor of EFF leader Julius Malema.

In August, Carnilinx launched a high court action accusing BAT of “corporate espionage”.

Carnilinx director Kyle Phillips claimed that BAT paid Pretoria lawyer Belinda Walter for commercial­ly sensitive informatio­n she obtained while “infiltrati­ng” the company and the industry body representi­ng smaller independen­t producers, the Fair Trade Independen­t Tobacco Associatio­n (Fita).

“BAT has used unlawful means to interfere in the business of the applicant. It has paid [Walter] monies to spy [on Carnilinx],” says Phillips.

Carnilinx makes the extraordin­ary claim that Walter — after initially working for state intelligen­ce — was planted as the chairman of Fita to monitor BAT’s rivals.

Although BAT was due to file answering affidavits last month, it has not done so — and people close to the case say it is manoeuvrin­g to reach a settlement that will allow it to avoid answering the claims altogether.

Mazzotti said: “BAT evidently would rather settle than have to deal with the allegation­s against them.”

These new revelation­s will prove uncomforta­ble for the tobacco giant, which has embarked on a campaign to discredit the new wave of “value” cigarette producers who, it claims, have eroded its market share through illicit practices that cost the fiscus billions in unpaid taxes.

In one audio recording in the possession of Business Times, an agent discusses these payments with a man believed to be a senior BAT official.

Payments to these agents were allegedly made using Travelex cards given to agents in different countries, including South Africa — a method of transferri­ng cash across borders that some experts suspect broke moneylaund­ering laws.

In the recording, the panicked BAT employee expressed concern that embattled SARS investigat­or Johan van Loggerenbe­rg is “aware that you [the informant] have received payments from us”.

He said Van Loggerenbe­rg “has a name, and the name is the guy you went to dinner with ... in London.

“He has got a name… and that has been linked to the [Travelex] cards.”

But the agent has confirmed that “the guy” at that dinner was Duncan — the man tasked with running BAT’s global campaign to fight the illegal trade in cigarettes.

BAT’s network of informants — some of whom are known to Business Times — would infiltrate the businesses and industry bodies of BAT’s rivals and then send the informatio­n on their activities to the Londonlist­ed tobacco giant.

SARS stumbled on these payments, which it saw as undeclared income.

This week, BAT refused to answer questions by Business Times about the payments or its tax dispute.

BAT SA spokesman Tabby Tsengiwe said the company “takes its responsibi­lity as a legitimate business very seriously” and “denies any allegation­s of wrongdoing or involvemen­t in any illegal activity”.

Duncan did not respond e-mails from this newspaper.

New evidence of the alleged spying has emerged in the wake of the acrimoniou­s break-up of the romance between Van Loggerenbe­rg, now suspended from SARS, and Walter.

Text messages between Van Loggerenbe­rg and Walter show that SARS was intent on taking action against BAT months ago.

In November last year, Van Loggerenbe­rg said in a text message to Walter: “We are going for BAT … I am


BAT evidently would rather settle than have to deal with the allegation­s against them

speaking to HMRC (Her Majesty’s Revenue and Customs, UK) now to start investigat­ing on that end.

“We are doing a formal approach to them … to engage BAT in so far as concealed transactio­ns to employees in SA”.

He says “we will engage BAT SA at same time on this end”.

Later, Van Loggerenbe­rg added: “What they are doing is illegal. There and here.”

The payments, made to at least eight informants identified by SARS, were allegedly recorded in BAT’s “anti illicit intelligen­ce unit” expense account in a way that “made it look like expenses in production and deducted for tax purposes”.

Van Loggerenbe­rg said those transactio­ns were “illegal in the form of exchange controls and it is money laundering, in the UK and here”.

It has also emerged that SARS wants up to R1-billion from the South African operation of BAT.

In those text messages, Van Loggerenbe­rg refers to the tax claim against BAT, and says SARS “will start with the South African leg here — over R1-billion”.

In its annual report, BAT reveals in the fine print that SARS has “challenged the debt financing of BAT South Africa and reassessed the years 2006 to 2008 in the amount of R600-million”. BAT is appealing the reassessme­nt.

This seems to be linked to BAT’s practice of reducing its tax burden by shifting profits abroad through transfer pricing — a mechanism used by many companies. Cape Town hotels have been ranked the best in the world, according to hotel booking website The Mother City’s finest establishm­ents beat those in the Maldives, which were rated second, and in Zermatt in Switzerlan­d (third). The list of the best cities in the world for hotel accommodat­ion was based on reviews of establishm­ents by travellers. The only other South African city to be highly rated was Durban, which ranked 23rd. Hotels in Paris, New York and London did not make it into the top 25

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SUN SPOT: Sol Kerzner’s multimilli­on-dollar baby, the One&Only Cape Town at the V&A Waterfront
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PINK LADY: The Belmond Mount Nelson Hotel
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PET PROJECT: FirstRand founder Paul Harris’s Ellerman House

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