Fran Abrams and Andy Rowells, 24 September 2000
Article originally appeared in The Independent on Sunday and can be accessed at Andy Rowell's Website
It Just Fell off the Back of a White Van
Its all Very Odd: British Tobacco Companies Export Billions of Cigarettes Where They Know They Have no Market: Why?
As the champagne flowed in the Gallaher cigarettes pavilion at the Cannes film festival, the notorious bootlegger Dave West was having a fine time. Mr West, who sells cigarettes and tobacco to the "white van trade" from his warehouse in Belgium, could not have wished for more lavish hospitality. His room in the pounds 350-a-night Hotel Majestic, paid for by the makers of Benson and Hedges and Silk Cut, had views of both the Mediterranean and of the stars as they arrived at premieres next door.
"We had whatever we wanted," Mr West said. "Caviar, champagne, a motor launch to joy-ride us about the waves. I even met Kiefer Sutherland, standing there looking like a little boy lost in the hotel lobby. I went up and shook his hand, and he said 'Hello mate, nice to meet you'."
Other cigarette companies had been equally generous, Mr West said. One such firm had taken him and his wife to Grand Prix motor races in Belgium, Spain and Italy. The cosy relationship between this bootleggers' champion and tobacco companies that regularly condemn smuggling might raise an eyebrow or two. But Mr West's business is modest compared to the hard- core trade in smuggled tobacco that is flooding into the UK in huge lorries and container ships.
While Dave West's trade relies on the fact that taxes are lower in Belgium, where he trades, the serious criminals ship millions of cigarettes in a single consignment with no duty paid at all.
Whether the cigarettes are bought legally or illegally, the company gets paid. When a consignment of smuggled cigarettes is destroyed at Dover, the smugglers go back to their distributors for replacements, and the companies, at the end of a long supply chain, get a new order.
Now Gallaher, along with its main domestic rival, Imperial Tobacco, is facing questions from British customs officials who want to know where its cigarettes go once they leave the UK. The companies are exporting billions of cigarettes every year to countries where they know they have little or no market. And they are facing even more pressing questions about how many of the cigarettes shipped out of Britain - more than half in the case of Imperial - end up back on the black market here, sometimes within days.
All over the world, companies are being quizzed on how their legitimate trade has become entangled with that of the smugglers. Last week the Colombian government filed a suit against another UK firm, British American Tobacco (BAT), which makes 555s and Lucky Strikes. According to Colombia's filing, the firm has pursued "a massive, ongoing smuggling scheme". And in the next two weeks Stephen Byers, the Trade and Industry Secretary, will announce whether he plans to launch a formal inquiry into the company. So far neither Gallaher nor Imperial, which makes the Regal and Superking brands, has been accused of such skulduggery. But both are certainly, if unwittingly, fuelling the illicit trade.
Research carried out in conjunction with the Big Issue and the anti-smoking organisation Ash reveals that the scandal goes back to 1993, when a hike in UK tobacco tax coincided with the opening up of European borders. Suddenly the tiny Pyrenean state of Andorra began to see an influx of British cigarettes, brands smoked mainly in the UK. Soon the mysterious trade had reached mammoth proportions. European Union fraud investigators noted that at one point no fewer than 9 million cigarettes per day were being shipped in. To consume that quantity, every one of Andorra's 70,000 men, women and children would have to have smoked 130 cigarettes a day.
In reality the produce did not linger long in the warehouses where it was piled high upon pallets. It emerged that some consignments had taken just one week to travel from Gallaher's factory in Antrim, Northern Ireland, to the landlocked principality, then back again into the seedier pubs of north-east England.
In 1997, with the situation rapidly getting out of hand, customs officials from across Europe stepped in to close down the trade, and it faded away as rapidly as it had emerged. In January 1998, there were no British tobacco exports to Andorra.
But the trade continued unabated. One night in October 1997, Italian police operating off the Adriatic coast intercepted an 18-metre speedboat heading for a beach between Bari and Brindisi from the port of Bar in Montenegro. It contained thousands of Superking and Regal cigarettes made in Britain by Imperial Tobacco and destined to return there. The consignment was worth a total of pounds 140,000, and had been transferred legally by road from the UK to Montenegro, a notorious centre for smuggling.
Again, the European officials' antennae began to twitch. By 1999, 45 per cent of cigarette seizures in the Adriatic were of British cigarettes. Even more disturbingly, they bore English health warnings, which indicated that they were on the way back to Britain.
"It is very suspicious that Regal and Superking, mainly smoked in the UK, are transported to several countries apparently with no reason," a spokesman for Olaf, the EU's anti-fraud office said.
This time the smugglers were thwarted not so much by police as by another force - war. As the Kosovo conflict intensified in 1998 and 1999, both the presence of warships in the Adriatic and the difficulty of moving goods by road combined to put a brake on their activities.
Now Cyprus, already operating as an alternative sea route to Montenegro, is coming into its own. This year, according to export figures leaked to the Independent on Sunday, Gallaher and Imperial are on course to ship a total of nine billion cigarettes to Cyprus. Cypriots, though, are not big smokers of UK cigarettes. In fact, industry data shows that Gallaher and Imperial can have no more than 1.4 per cent of the market between them. That makes a total of 1,932 smokers, each of whom would have to light up no fewer than 13,000 a day to support such a trade.
According to the EU fraud office, many of them will be shipped to Israel, Ukraine, Syria and Egypt, none of which has any significant market for the British brands. Although no one has yet proved where they go next, what customs do know is that they are seizing unprecedented numbers of UK cigarettes at docks in Dover and Felixstowe.
Customs sources say that they expect to seize two billion cigarettes this year - a massive 60-fold increase since 1995. Already they have destroyed 400 million cigarettes of just one brand, Regal, traditionally smoked in the North and Scotland. Half of this year's total haul so far has been made in Britain by Imperial, and many more by Gallaher.
And the net is still shifting and spreading. Launching a government anti- smuggling initiative last week, the Paymaster General, Dawn Primarolo, said recent seizures had come from China and other parts of the Far East as well as from the Balkans.
She also revealed that customs officials have begun to detect an illegal trade from South Africa, which is expected to receive no fewer than 9.5 billion Imperial cigarettes this year.
Wherever those cigarettes go, it is unlikely they will be smoked in South Africa, whose market is dominated by Rothmans and BAT. Ms. Primarolo did not even mention Belgium and Luxembourg, which will import more than 11 billion Gallaher and Imperial cigarettes this year despite having only a tiny market for them outside of the warehouses run by Mr West and his kind.
The companies have helped to make Mr West a multimillionaire, but they say they are doing nothing illegal or wrong. "What we are doing is legal, what West is doing is legal, but we know the law is being broken at some point in the chain," says Paul Sadler, Imperial's external affairs manager. "We are well aware that a lot of the goods he sells come back into the UK, a hell of a lot."
Mr Sadler says EU competition rules would prevent his firm from refusing to trade with Mr West, and that his firm would never condone smuggling. This is not a victimless crime, he says: "It is encouraging criminal activity. It undermines the whole principle of upholding good law," he says.
But as Dawn Primarolo posed for photographs last week, perched atop a huge pile of Imperial Superking cigarettes seized at Dover, she might have agreed with him that customs are just "scratching the surface" of the problem. Customs seize no more than 10 per cent of the total number of cigarettes entering Britain illegally. Compared to the pounds 2.5bn lost to the taxpayer this year through cigarette smuggling - the equivalent of 7,700 new hospital beds - the pounds 200m Ms Primarolo has promised to tackle smuggling over the next three years looks a mere drop in the ocean. |
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