British American Tobacco

British American Tobacco proposes $47B Reynolds merger

Oct 21st, 2016

http://www.usatoday.com/story/money/business/2016/10/21/british-american-tobacco-proposes-47b-reynolds-merger/92504316/

British American Tobacco announced plans Friday to buy the stake that it doesn’t already own of tobacco firm Reynolds American Inc. for $47 billion.

London-headquartered BAT already owns 42.2% of the Winston-Salem, N.C. headquartered-firm, which manufactures Camel cigarettes. It wants to acquire the remaining 57.8% at $56.50 per share — $24.13 in cash and $32.37 in BAT shares.

BAT, which is behind brands including Dunhill, Lucky Strike and Pall Mall, said the merger would create a stronger, “truly global” company with a leading position in the U.S. market and a significant presence in South America, the Middle East, Africa and Asia.

“We have been a shareholder in Reynolds since its creation in 2004 and have benefited from its growth in the US market,” said Nicandro Durante, chief executive of BAT.

“The proposed merger of our two great companies is the logical progression in our relationship.”

BAT’s shares advanced about 3% in London after the announcement.

Big Tobacco sees its future in cigarettes, not vaping

Oct 20th, 2016

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http://theconversation.com/big-tobacco-sees-its-future-in-cigarettes-not-vaping-67363

In 2012, in the early days of the rise of e-cigarettes, Kingsley Wheaton, Director of Corporate and Regulatory Affairs at British American Tobacco, said “Our core business is, and will remain in, tobacco”.

So have the intervening four years made much difference? Apparently not.

This month, senior Philip Morris International executive Werner Barth told shareholders at its investor day presentations the company fully expected its cigarette brands to remain highly profitable. Investment analysts Motley Fool summarised the presentation by saying that Philip Morris planned to have cigarettes “keep bringing in the bulk of its revenue for years to come.”

In 2014, more than one billion smokers spent some $US744 billion on 5.6 trillion cigarettes. By contrast, the global e-cigarette market had estimated sales of $US6.1 billion in 2015 (0.8% of the cigarette market). Bullish forecasts about the future of e-cigarettes are easy to find on the internet. Many of these are undoubtedly efforts to attract investors.

But recent data point to a major slowing in the growth that has been seen in some nations for about five years. In the important US convenience store sector, sales of vapour products fell continuously for seven months (note that this data does not include online or vape shop sales).

A report earlier this year in the industry magazine Tobacco Reporter quoted a Euromonitor tobacco analyst saying:

Western Europe – for the first time in several years – saw positive [tobacco] volume growth as economies recovered and out-switching to illicit and vapour products lessened.

Barth highlighted three high-growth segments for cigarettes: low-tar cigarettes, which Motley Fool noted “have become an important way that some smokers have aimed to address their concerns about potential health impacts of smoking”; slimmer cigarettes (a strategy usually targeted at women); and the capsule market, where smokers can burst a capsule of flavour embedded in the filter.

Low-tar cigarettes have of course been thoroughly discredited as false and misleading harm-reduced products. The Australian Competition and Consumer Commission (ACCC) has banned the light and mild descriptors in Australia. The tobacco industry knew about this deception for decades (see below) but is apparently still happy to benefit from and not actively correct consumer misunderstandings here.

Big Tobacco knew 44 years ago that people did not smoke like tar measuring machines. Legacy Industry Documents Library

In recent years we have seen an incontinence of rebirthing talk from Big Tobacco companies such as Philip Morris, British American Tobacco (BAT), RJ Reynolds and Japan Tobacco International about their commitment to manufacturing non-combustible nicotine delivery devices, particularly e-cigarettes and Philip Morris’ heat not burn products.

The hope for these products, like a conga line of hyped harm-reduction failures of the past, is that they will significantly reduce disease and death from what follows from nicotine addiction.

Tobacco companies of course all wish that two in three of their very best customers didn’t inconveniently die from using their products years earlier than normal life expectancy. They would much rather they could all keep smoking for a normal life span and keep the cash registers turning over.

For decades companies just denied that smoking killed. In the 1990s, these lies were stopped in their tracks when the companies were forced to publicly swallow truth serum in the form of their own newly public internal documents, released via whistleblowers and through litigation. These showed they knew the problems with tobacco all along.

If the industry really cares deeply about the deaths of its customers, this care is not enough to do anything to stop it selling the deadliest forms of nicotine delivery, nor to desist from its major attacks on tobacco-control policies it knows are most effective in reducing smoking. Plain packaging, which started in Australia, continues to attract massively funded attacks and legal challenges, currently in full swing in Canada which is nearing legislation.

Every day British American Tobacco’s twitter feeds around the world are choked with its best efforts to demonise tobacco tax rises, all in the hope that governments will reduce tobacco tax. This would see both smoking and the diseases it causes rise.

The very last thing that Big Tobacco hopes for harm-reduced nicotine products is that they will cannibalise their mainstay cigarette markets. Instead, the business model is dual use (people smoking where and when they can smoke, and vaping when they can’t); luring ex-smokers back as customers with promises of negligible harm from vapoursied nicotine products; and intriguing young people who have never used any nicotine product and who are increasingly never likely to, to start experimenting with vaping and hopefully doing it regularly.

In the United States, the latest National Youth Tobacco Survey shows the historically continuing fall in youth smoking has come to a screaming halt coincident with record use of e-cigarettes. The anxiety in the tobacco industry about this must be all-consuming.

There is now a small group of experts in public health who are now openly or covertly collaborating with the tobacco industry over e-cigarettes. They are being comprehensively played. In mouthing its newfound concern for tobacco’s harms, the industry’s harm-reduction division personnel can now cosy up to a suite of naïve or historically amnesic public heath urgers who lend Big Tobacco a credibility it craves.

Meanwhile, down the Big Tobacco corridor in the cigarette divisions, the harm-reduction staff’s colleagues continue promoting smoking and attempting to thwart effective tobacco control as usual.

This new, embarrassing and appeasing embrace is rather like charity leaders warmly embracing a mafia boss for his generous annual cheque, knowing full well from where the largesse was derived.

Exposure to e-cigarette vapour induces negligible or no oxidative damage to lung epithelial cells

Oct 5th, 2016

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http://www.news-medical.net/news/20161005/Exposure-to-e-cigarette-vapour-induces-negligible-or-no-oxidative-damage-to-lung-epithelial-cells.aspx

E-cigarette vapour is much less harmful to lung cells than cigarette smoke. Lab tests show that, unlike tobacco smoke, which causes oxidative stress and cell death, e-cigarette vapour does not. Oxidative stress and cell death are driving factors in the development of many smoking-related diseases such as COPD and lung cancer.

Vapour from e-cigarettes has been found to contain significantly lower levels of the toxicants found in cigarette smoke (Chemical Research in Toxicology DOI: 10.1021/acs.chemrestox.6b00188), but suitable lab tests and clinical studies are necessary to understand whether this translates into reductions in biological responses and disease.

Researchers at British American Tobacco have developed a standardized way of measuring and comparing the potential of conventional cigarette smoke and e-cigarette vapour to cause oxidative stress in an in vitro model of lung epithelium.

To do this they bubbled matched amounts of smoke (from a reference cigarette) or vapour (from Vype ePen or Vype eStick) through cell-growth medium to produce a stock that could be diluted into various concentrations. They then exposed lung epithelial cells to the same concentrations of either smoke or vapour extract and, following exposure, used a panel of commercially available assays to measure and compare the stress responses of the cells.

Lung cells exposed to any of the concentrations of cigarette smoke showed signs of oxidative stress and, at higher doses, cytotoxicity. In stark contrast, vapour from e-cigarettes tested had no such effects, even at the highest concentration.

The research is published in a special edition on e-cigarettes of Toxicology Mechanisms and Methods DOI: 10.1080/15376516.2016.1222473.

Transparency, Yes. Interference, No.

Oct 5th, 2016

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http://www.huffingtonpost.com/vera-luiza-da-costa-e-silva/transparency-yes-interfer_b_12351906.html

Vera Luiza da Costa e Silva Head of the Secretariat of the WHO FCTC

There was a time when public health discussions on tobacco were an extraordinarily open process. Government officials met a wide range of people and listened to their concerns and ideas as they formulated policy.

Among the “contributors” were representatives of the tobacco industry, which offered assurances about its earnest intentions. The tobacco industry had access to policy-makers and infiltrated public health forums and because everyone involved was open the industry gained access to internal government documents listing a wide range of ways of regulating the industry.

All that changed when courts, particularly in North America, began considering cases from tobacco victims. Judges ordered – as is normal in such matters – that the tobacco industry discloses internal documents to plaintiffs. It became clear that the industry lied when denying the harms caused by their products, disputing scientific findings, and luring millions, including the world’s youth, into addiction, in a drive to build its business.

The publication of this mountain of paperwork (the documents are now numbered in the millions) from the late 20th and early 21st centuries was a watershed moment, providing incontrovertible evidence that the tobacco industry could not be trusted. There was no sign of the earnest partner the industry claimed to be.

Documents show how the industry worked behind the scenes successfully lobbying policy makers to discontinue or water down tobacco control measures. The documents mapped efforts to delay and confound policy initiatives and to create vast new markets in the developing world. They also show how the tobacco industry created or co-opted front groups to defend their interests and used tobacco farmers to prevent governments pushing on with public health policies.

As British American Tobacco’s (BAT) chairman noted in an internal memo in 1990: “We should not be depressed simply because the total free world market appears to be declining… There are areas of strong growth, particularly in Asia and Africa… it is an exciting prospect.”

The revelations kept on coming, including the disclosure that industry research was suppressed or secretly moved to other countries to put material beyond the reach of the courts. Other documents showed how the industry conspired in attempts to raise the proportion of women smokers to the levels of men.

The tobacco industry documents had a significant effect – firstly on the court cases to which they related, but just as importantly in creating a resolution among policy-makers. If the tobacco industry was now a global industry seeking to expand to new markets, the response must be equally global.

The UN Tobacco Control treaty itself, the WHO Framework Convention on Tobacco Control (WHO FCTC), was a response to the transnational nature of the business and the need for a global response to curb the epidemic. It entered into force in 2005 becoming the first global health treaty, an attempt to strongly regulate the trade in this noxious product.

The Convention brought together various government sectors with public health experts, researchers and others in the certainty that unified action was required to counteract the industry’s behaviour. This, we fervently hoped would save millions of lives.

We have been successful in doing so, even as we recognise that the tobacco industry is expanding its markets, placing many more people at risk of premature death.

The tobacco industry is targeting Parties’ delegations attending the world’s largest intergovernmental meeting solely dedicated to tobacco control. At the last Conference of the Parties in 2014, letters were sent representing tobacco industry interests petitioning finance officials on taxation.

We cannot sit at the negotiating table with the people who caused this global disaster because one thing is crystal clear – this industry lies. Publicly it speaks in a mild voice, while behind the scenes it executes policies in absolute opposition to its public statements, ultimately killing one in every two regular users of its products.

So when we meet in Delhi in November for the WHO FCTC’s seventh session of the Conference of the Parties (COP), we will be making documents available, we will be briefing journalists and we will publicize our decisions.

We will also guard against tobacco industry interference, this most untrustworthy of businesses. It would be a dereliction of our duty to do otherwise.

That means some sessions will be held in public and some behind closed doors, normal in international meetings and as provided by the rules of the FCTC Conference of the Parties. We will be as open as possible, but we are not naive. We have learned a critical lesson – this industry can never be trusted and will try to disrupt and confound the tobacco control process.

COP7 will, I believe, send an unequivocal message to the tobacco peddlers. The world understands who you are and what you do, and is determined to stamp out the global plague which you do so much to spread.

Follow Vera Luiza da Costa e Silva on Twitter: www.twitter.com/@vera_dacosta

The BAT whistle-blower: Francois van der Westhuizen

Sep 1st, 2016

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BAT will soon have to stand up in court and explain itself

http://www.financialmail.co.za/coverstory/2016/09/01/the-bat-whistle-blower-francois-van-der-westhuizen

The man who blew the whistle on the alleged racket of bribes relating to British American Tobacco (BAT) says he and his wife still get death threats.

“Often, my wife will be in a shopping centre and guys who’ve clearly followed her will tell her they’re going to come get us,” says Francois van der Westhuizen in an interview with the Financial Mail.

“It doesn’t bother me; I’ve had plenty of threats in my life.”

Van der Westhuizen worked in the murder and robbery section of the SA Police in 1987 during the apartheid era, before being hired as an investigator at the Road Accident Fund in 1999, where he bust a R92m scam involving crooked doctors, lawyers and police.

Tall, with a moustache and a brusque, no-nonsense demeanour, he still has the hardened air of a cop.

In 2012 he was hired by Forensic Security Services (FSS), a company that works as the contracted security arm of BAT for an estimated R150m/year.

“We talk about state capture, but BAT has done state capture high-up — when it comes to Sars (SA Revenue Service), the police, and state intelligence,” he alleges.

He says that once he joined FSS, he was asked to work full-time on its programme to root out illicit tobacco.

“Our work mostly revolved around conducting surveillance on its [BAT’s] rivals, like Carnilinx and Gold Leaf, and then reporting back. But soon it escalated into far more serious stuff, like paying off people.”

This “serious stuff” is detailed in a 70-page affidavit he signed, which was then used by Carnilinx, a “value-branded” cigarette manufacturer owned by Adriano Mazzotti, the charismatic benefactor of Julius Malema. Carnilinx took BAT and a lawyer, Belinda Walter, to court to ask the court to stop it “interfering with its trade”, using this testimony. The judge dismissed the original application on procedural grounds, and a new case is likely to be lodged soon for a full hearing.

It’s a reputational nightmare for BAT, the second-largest company listed on the JSE, with a market value of R1.81 trillion. Locally, it’s a Goliath, controlling 85% of the tobacco market through brands including Rothmans, Dunhill, Lucky Strike and Peter Stuyvesant.

A stash of explosive documents was released in recent days by someone using the pseudonym SA Tobacco Espionage, which casts new light on alleged efforts by tobacco firms to compromise the SA Revenue Service (Sars). This is important, considering that the claims of a “rogue unit” at Sars, which are being used to target finance minister Pravin Gordhan, were first made by tobacco interests.

Thanks to Van der Westhuizen, however, the agendas are becoming clearer. “I worked for FSS, but BAT was aware of what was happening every step of the way,” he says.

“They even sent me for training with their staff from the UK, so they can’t claim they didn’t know.”

In his affidavit, Van der Westhuizen says he soon discovered he’d really been hired “to disrupt the business of BAT’s competitors” using a network of corrupted police and Sars officials.

He claims BAT had an “unholy alliance” with law enforcement agents, and also political strings it could pull with “senior members of the SA law enforcement circles”.

“Each law enforcement agent, whether from Sars, the Johannesburg Metro Police Department (JMPD) or SAPS, would be on BAT’s informal payroll, receiving a minimum of R2,000 each per month, up to R5,000 each per month. Effectively this was a bribe,” he claims.

These officials would allegedly help break into various properties, illegally intercept phone calls, plant cameras in offices and homes, and pay police to conduct raids to gather documents.

Van der Westhuizen says he was the “project manager”, under whom a network of “handlers” would liaise with 171 “agents” who were paid “directly by BAT through FSS as a conduit”. “The payments were made in cash so that there was no direct link to BAT.” In all, he says, these spies were paid more than R150m by BAT.

He says FSS was given access to the JMPD’s network of 240 cameras throughout Jo’burg, which they used to spy on Carnilinx’s offices.

“The law enforcement agents who, as I have shown earlier, get paid by BAT will do whatever they are asked to do, no matter how illegal or unjust,” he claims.

FSS’s Stephen Botha has rejected Van der Westhuizen’s claims as “factually inaccurate”, saying they contain “loose allegations, matters of hearsay and extracts of alleged FSS documentation that has been presented in a distorted manner”. And when it comes to the security cameras, Botha says: “I am not aware of any camera being commandeered as you have stated.” Botha says it seems that Van der Westhuizen’s only goal is to “discredit FSS and BAT”.

This week, BAT ignored a list of questions from the Financial Mail but sent through a statement. In it, Joe Heshu, BAT’s head of regulatory engagement, says: “Under no circumstances will we condone illegal behaviour … we are conducting an investigation with the assistance of an external law firm, and if we were to find that illegal activity has occurred, we would, of course, take appropriate action.”

Richard Burrows, BAT’s chairman, spoke of such a probe in BAT’s annual report relating to “historic misconduct in Africa”, which it was made aware of in late 2015.

BAT SA’s head of anti-illicit activities, Martin Potgieter, has already submitted an answering affidavit to Carnilinx’s accusations in which he says it hired FSS simply to “gather information and pass it on to the law enforcement agencies”.

Potgieter said BAT only co-operates with the law enforcement agencies in order to defeat the illicit cigarette trade in SA, which now accounts for 31% of the total SA market, leading to a R3bn-R5bn annual tax loss.

People close to BAT say that rivals are good at making allegations which cannot be proven, simply to distract attention from the illicit tobacco business. “There’s a bigger hand at play and the bad guys are playing it well,” said one. Still, this isn’t the first time BAT has been accused of spying on rivals. In 2014, Walter said she had been paid by BAT while employed as a lawyer for its rivals, including Carnilinx, and chairing the Fair-trade Independent Tobacco Association, Fita.

Walter wasn’t the most credible witness. Not only was she a triple agent, working for BAT, the State Security Agency (SSA) and Fita at one stage, but she also flip-flopped on her story numerous times.

However, it was ultimately Walter’s ill-fated romantic relationship with Sars’s Johann van Loggerenberg that triggered the various inquiries into Sars and the claims of a “rogue unit”.

Walter initially claimed Van Loggerenberg had confided confidential taxpayer details, before recanting this testimony, only to repeat the accusation later.

But when it comes to BAT, at least, there are tape recordings of her speaking to BAT executives, who appear to be panicked at the prospect of Sars finding out about the payments made to its “agents”.

In the recording, a BAT executive implores Walter not to “sell us out” and says “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 life-threatening issue”.

Documents confirm Walter was paid £30,500 (about R570,000) by BAT.

In a letter to Walter on March 6 2014, BAT’s Ewan Duncan says the company’s relationship with Walter was “legal and proper throughout”. “We established a mutually agreeable relationship in order to provide information on criminal activity to SA law enforcement and national intelligence agencies,” he said.

While details of Walter’s relationship with BAT are believed to have been scrutinised by Britain’s Serious Fraud Office (SFO), it is Van der Westhuizen’s claims which could prove more damaging, if he can produce all the evidence he says he has.

It comes three months after another whistleblower, Paul Hopkins, gave a dossier to the SFO in which he says he bribed officials and spied in numerous East African countries for 13 years for BAT.

Hopkins says BAT paid security firms in these countries who acted as “cut outs” to allegedly distance the tobacco giant from the dirty business of paying bribes, conducting black-ops and moving cash across borders.

It is eerily similar to the arrangement BAT is alleged to have with FSS. Van der Westhuizen told this magazine: “You can’t tell me it’s right that one company, no matter how much money they have, can do things like hijack the police’s security cameras so they can keep an eye on competitors.”

Van der Westhuizen’s detractors say his affidavit is simply the work of a disgruntled ex-employee seeking to assist another role-player, Carnilinx.

But he says he has never worked for Mazzotti’s company, which benefits most from his revelations. “There is a mountain of evidence for everything I said in there, and that’s stored with numerous people. Plus others are coming forward with the same story,” he says.

So why did he blow the whistle? “Well, I began to realise that what was happening was highly illegal.

“They told us it was all legitimate, and that it was sanctioned by the authorities. But I then realised this wasn’t so, and if it came out what we were doing, none of us would be protected,” he says.

Either way, BAT will soon have to stand up in court and explain itself. Mazzotti’s court application was initially struck off the roll, and has now been re-enrolled by summons in which people will have to testify. And Van der Westhuizen will have to be grilled on his claims.

“I’m fully prepared to do that. I want that,” he says.

NTS probing foreign tobacco firms’ suspected tax dodging

Aug 30th, 2016

by Editor.

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http://english.yonhapnews.co.kr/business/2016/08/30/0503000000AEN20160830002500320.html

SEOUL, Aug. 30 (Yonhap) — South Korean tax authorities are investigating foreign tobacco companies over suspicions that they evaded taxes on huge profits from a tobacco price hike last year, industry sources said Tuesday.

Citing the need to discourage smoking, South Korea marked up taxes levied on cigarettes by 2,000 won (US$1.79) in January last year, raising the price to 4,500 won per pack.

Cigarette makers are said to have raked in tens of millions of dollars in so-called inventory profit by keeping products shipped out before 2015 in stock and selling them after the tax hike for a huge gain.

According to the sources, the National Tax Service (NTS) has been conducting an extensive tax probe into Philip Morris Korea, which sells the Marlboro brand, and British American Tobacco (BAT) Korea, the vendor of Dunhill cigarettes.

NTS investigators are focusing on suspicions that some tobacco companies, aware of the expected price hike beforehand, pocketed “excessive” profits by stocking up on products and selling them after the tax increase, they said.

“A tobacco price hike can give cigarette companies large profits by enabling them to sell some products in inventory, which were shipped out before a price hike,” an industry source said. “The NIS seems to be investigating their suspected tax evasion or hoarding during the process.”

An NTS official refused to confirm the tax probe, citing an office policy that it can’t “comment on a tax audit into a specific taxpayer.”

Tobacco companies got a lot of flak for their inventory profit last year. Faced with a growing public outcry, South Korea’s sole tobacco maker KT&G Corp. announced in April last year that it would donate 330 billion won for social contribution activities. KT&G spent 80.8 billion won last year and plans to fork out 70 billion won this year.

Some watchers said KT&G may have been spared a tax audit because of its donation.

Philip Morris and BAT Korea complain that it is unfair and discriminatory against foreign tobacco companies for the NTS to exclude KT&G, which they argue reaped the largest inventory profit from the tax hike.

Philip Morris, British American Tobacco under tax audit

Aug 30th, 2016

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PMI, BAT criticized for failing to pay taxes despite huge amount of profits

http://www.koreatimes.co.kr/www/news/biz/2016/08/488_213079.html

The National Tax Service (NTS) has launched special audits of foreign tobacco makers here, according to industry sources on Tuesday. The move comes amid allegation that the companies did not pay taxes though they enjoyed tens of billions of won of “inventory profit” after the price hike in January last year.

However, the companies complain that the investigation is unfair because KT&G, the country’s homegrown cigarette maker, also enjoys massive profits but was not included in the special probe.

According to a source close to the matter, Philip Morris International (PMI) Korea, which manufactures Marlboro, and British American Tobacco (BAT) Korea, which makes Dunhill, are under the tax agency’s scope.

Tobacco makers pay taxes when they are shipping products. Since many of the tobacco products which were shipped before the price hike were held in inventory, those sold after the hike generated greater profit for the companies. The NTS is looking into whether the tobacco makers have paid the due amount of taxes and whether any illegalities were involved in generating the profit.

Three tobacco manufacturers, PMI Korea, BAT Korea and KT&G reportedly enjoyed the tax margin worth 150 billion won, 24 billion won and 330 billion won, respectively, from tens to hundreds of billions of won, respectively, after the price of a pack of cigarettes increased by 2,000 won.

Amid controversy, KT&G last year announced a plan for corporate social responsibility projects worth 330 billion, pledging it will return such profits to society. The company spent 80.8 billion won last year and will spend around 70 billion won by the end of this year.

Observers say that KT&G’s move influenced the NTS to launch occasional audits on the foreign companies. Both PMI Korea and BAT Korea finished regular audits in the first half of this year.

However, the foreign tobacco makers say that the government’s decision is unfair.

“Not only the NTS but also the Board of Audit and Inspection has been investigating foreign tobacco makers over the tax margin, but the fairness of such audits is questioned because they were just focusing on foreign tobacco makers,” said a PMI Korea official.

“Due to the nature of the tobacco industry, there is always stock in inventory. To return the tax margin to society, PMI Korea lowered the price of its products by 200 won and absorbed the loss,” she said, adding that PMI Korea has already announced a 21.5 billion won project for social contribution last year.

An NTS official said the tax agency does not affirm an individual company’s tax audit, but added that it launches an audit on numeric analysis.

The day Pravin Gordhan took on big (illegal) tobacco

Aug 25th, 2016

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Gordhan and his colleagues’ investigations of the illicit tobacco trade – which appears to involve top politicians and businessmen – is possibly the reason they’re being targeted now.

http://www.citizen.co.za/1263756/the-day-pravin-took-on-big-illegal-tobacco/

Finance Minister Pravin Gordhan must be wondering whether one of his old plans while he was in charge of the SA Revenue Service (Sars) – combating the illegal tobacco trade in South Africa – was worth it.

Because that is apparently where the nightmare he finds himself in now began.

While Gordhan will not be reporting to the Hawks this afternoon, it appears as if former Sars deputy commissioner Ivan Pillay, together with former group executives Pete Richter and Johan van Loggerenberg, will be knocking on Brigadier Nyameka Xaba’s door, where they will be informed of their rights under the constitution and the charges against them.

Pillay, Richter and Van Loggerenberg will be kept in separate rooms as, one by one, they are informed of their rights under the constitution and the charges against them.
Van Loggerenberg has urged the public not to overreact to speculation.

“As early as 31 July 2014, Sars was on record that the initial attacks on Sars, me and investigative units that I managed, were driven by persons associated with the tobacco industry,” Van Loggerenberg told The Citizen.

“I have continuously offered my cooperation to the authorities since as early as 2014. I have nothing to hide and deny any wrongdoing. As stated before, I have no doubt that if the Hawks conduct their investigations without fear or favour, the truth shall ultimately triumph.”

Gordhan and the others have to decide if they are willing to answer questions or make a statement, or simply inform Xaba they wish to testify in court.

The “rogue unit” narrative at Sars has been well documented and discredited. However Van Loggerenberg’s claim the tobacco industry was behind the destabilisation of Sars is startling.

Sars wars: where there’s smoke

If the Hawks need more information, it needs to look at pending court action between independent cigarette manufacturer Carnilinx and British American Tobacco (BAT), Forensic Security Services (FSS) and eight other respondents.

Former police officer and FSS investigator Daniel van der Westhuizen states on behalf of Carnilinx in its founding affidavit he was the project manager of operation “Knysna”, which was dedicated to disrupting Carnilinx’s operations.

In the affidavit, he claims stakeholders in the project were the “South African Police, Department of Priority Crimes Investigation, Crime Intelligence Gathering, Asset Forfeiture Unit, Sars, Customs, and the Traffic Control Policing Unit.”

He further claims BAT agents were paid up to R5 000 for disturbing Carnilinx operations.

“BAT SA paid an amount in excess of R150 million to the spies, through FSS,” said Van der Westhuizen, referring to “spies” recruited by FSS.

Van der Westhuizen stated further that if BAT SA were investigated properly, authorities “may well recover tens of billions of rands which are due to the fiscus.”

Spy games

According to a letter from former Fair Trade Independent Tobacco Association (Fita) chairperson Belinda Walter’s attorney in May 2014, it was between December 2012 and January 2013 that Walter was introduced to BAT, and the Tobacco Institute of SA (Tisa) and their private security firm FSS, and then subsequently to BAT United Kingdom.

“As a direct result of Ms Walter’s relationship with representatives of the State Security Agency (SSA),” Walter then entered into an agreement with BAT.

“Walter would provide BAT with information of and concerning the business operations, illicit and/or criminal activity of independent cigarette manufacturers who were clients of Ms Walter and/or members of the Fita (of which Ms Walter was the chairperson from its formation until November 2013),” the letter to Ewan Duncan of BAT declares.

For her work, Walter was to be paid £3 000 per month by BAT “to provide and share such information” with BAT, which would “be used by BAT in conjunction with SSA and other South African law enforcement agencies in order to combat criminality in the tobacco and cigarette industries”.

In the subsequent letter to BAT, Walter threatens to sue BAT for nonpayment of £5 000, and was also going to sue the SSA for misrepresentation, “as BAT, SSA, and the other South African law enforcement agencies were not sharing the information for the purposes alleged …” and “BAT required the information for purposes of industrial espionage” the letter continued.

Shortly afterwards, Walter was allegedly approached by members of Sars’ Tobacco Task Team and offered immunity from prosecution in exchange for dropping the civil action against BAT and the SSA.

However, in June 2014, rumours of a “rogue unit” within Sars began hitting the media.

Walter, a lawyer by profession, was allegedly paid in “Travelex” cards, which meant no cash trail for Sars and therefore no tax.

Then in July 2014, Walter’s SSA alleged handler told Walter “he represented interests of people who sought to replace the leadership of Sars and minister of finance”. The claim was circulated to various people within Sars on email by Walter on July 20, 2014.

At the time, Nhlanhla Nene was finance minister and Ivan Pillay the acting Sars commissioner.

In September, Tom Moyane was parachuted in as Sars boss after the crescendo of “rogue unit” articles grew.

The denials

“The illicit tobacco trade in South Africa, which accounts for nearly a quarter of the overall market, is a growing problem for our consumers and our business. For several years, we have endeavoured to assist the law enforcement agencies in their efforts to combat this illicit trade,” BAT said in a statement to The Citizen.

“We are currently involved in litigation with certain manufacturers, who have made claims that some of our activities went beyond our legitimate interest in combating the illicit trade.

“We are conducting an investigation with the assistance of an external law firm and if we were to find that illegal activity had occurred, we would, of course, take appropriate action. However, given that our investigation is ongoing and that some of the allegations are the subject of legal proceedings, it would not be appropriate for us to comment any further on them,” BAT stated.

Numerous attempts to engage Walter on the allegations proved fruitless.

Rot starts at the top

In a report entitled “Project Broken Arrow”, by an unnamed SA Revenue Services (Sars) official, it is brought to the attention of its former group executive Johann van Loggerenberg (JVL) and former deputy commissioner Ivan Pillay (IP) that there were efforts by “certain individuals”, who wished to destabilise and disorganise the organisation.

These “individuals” wanted to damage the reputation and stability of the targeted functionaries and that of Sars as a state institution, according to the document as seen by The Citizen.

The official claims to have met on several occasions in 2009 with former Sars employee Mike Peega (MP).

“…He duly informed me of his intentions to merge with other individuals in order to ‘expose’ and possibly ‘take care’ of JVL and a host of other significant individuals in the NRG [National Research Group],” it states.

“This would ultimately include the then commissioner of Sars and now Finance Minister Pravin Gordhan.

“MP spoke of a number of interested individuals inside Sars who are more than willing to combine efforts to target IP and JVL.

“It must be borne in mind that, although the aforementioned names of people were identified, NO other way of corroboration was actually done.

“The aforementioned individuals have allegedly met on a number of times at different locations before I could be approached.”

President Jacob Zuma in the report is often referred to as ‘old man’.

In an alleged timeline of events it is states:
• August 2009, a call was received from MP to meet.
• “MP came to my house and he told me that there were highly influential people that would like to meet with me.”
• The official then alleges that MP was referring to the late Leonard Radebe (LR), Mabheleni Ntuli (MN) and Bizoski Manyike (BM).

He continues:
• The following day… he came back to my house… at around 8am and he was driving a greenish Volvo SUV.
• He told me we were to meet with LR and BM for a discussion.
• We met LR alone at the House of Coffees in Silver Lakes at exactly 10 in the morning…
• BM did not show up.

Pay Close Attention to What’s in Your Ethical Fund

Aug 25th, 2016

by Editor.

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ESG and environmental investing booms to $223 billion

Lack of standards for what counts as ethical starts G-20 probe

http://www.bloomberg.com/news/articles/2016-08-24/anything-goes-with-ethical-funds-holding-exxon-to-big-tobacco

Thinking of putting your money into a fund that describes itself as ethical? You’d better read the fine print if backing Exxon Mobil Corp. and British American Tobacco Plc isn’t your idea of doing good.

The oil company accused of misleading investors by hiding evidence about climate change and Europe’s biggest cigarette maker are among the holdings of some of the 30 biggest funds that invest following environmental or social governance guidelines, according to data compiled by Bloomberg.

While some funds are strict about supporting only clean-energy producers, others buy securities from Big Oil to Big Tobacco along with consumer brands such as Unilever and Facebook Inc. The wide range of holdings is the result of each institution deciding on its own what meets the ethical threshold. Loosening that definition has helped ethical investing grow about 80 percent over the past five years to $223 billion, data compiled by Bloomberg show.

“The industry hasn’t done itself many favors in making sure people understand what’s what,” said Charlie Thomas, who manages 950 million euros ($1 billion) under Jupiter’s Ecology funds, which exclude oil and tobacco in favor of companies that have a solution for environmental issues. “The challenge that we have as a sector is to be very clear with the investor so they know what they’re actually buying. Not all ethical funds are the same.”

green-goes-mainstream

There’s no agreed definition on what an ethical fund should be. That has allowed to mushroom the number of funds saying they support companies guided by standards on environmental and social governance. There are no set criteria for how companies report performance on those metrics, and no regulator like the Securities and Exchange Commission has set out rules.

The looseness of the system is a concern to the Group of 20 nations, which asked a panel led by Bank of England Governor Mark Carney to draw up a proposal for voluntary reporting standards that companies could follow if they chose. That’s likely to offer best practices to companies and accounting firms that draw up sustainability reports and release data through organizations such as the non-profit CDP and Bloomberg.

ESG fund strategies range from excluding only companies they score the worst in their industries on specific metrics to including only the best of their class. Some seek to spur change by working as activist shareholders. A few will invest only in companies that benefit the environment. The only way to tell the difference is to look at what the fund is holding.

No Simple Label

“There’s not a simple label you can slap on it to solve the problem,” said Greg Elders, an analyst at Bloomberg Intelligence in London tracking ESG data. “Clients think it’s a shortcut for seeing how sustainable a fund is.”

The Bloomberg survey found the number of environmentally friendly or ESG funds has more than doubled in the past decade to about 730. Of the top 30, at least six hold oil companies.

At Impax Asset Management Group, which runs a $568 million Environmental Markets fund, the number of companies that meet its rules has jumped to 1,500 from 250 in 1999, with the pool of firms eligible to be included growing to $4.1 trillion, according to Jon Forster, a portfolio manager at the firm.

Investors have benefited from the diversification of green funds. The MSCI KLD 400 Social Index has risen more than 225 percent from the March 2009 low, about as much as the S&P 500 Index. The gauge includes 400 companies, with Microsoft Corp., Procter & Gamble Co. and Verizon Communications Inc. having the biggest weightings.

Growth in the sustainable-fund business, regardless of how “green” some of its investments are, is set to continue. A boom in renewable energy investment along with tighter environmental rules and increasing interest from younger people are the main drivers, said Sarbjit Nahal, head of thematic investing at Bank of America Corp. in London.

“The word I would stress is ‘mainstream,’” Nahal said. “There’s been a huge change towards taking longer-term issues into account. This is a space that you want to be in.”

Here are some of the top 30 ESG funds that hold oil and tobacco:

TIAA-CREF Social Choice Equity Fund, with $2.8 billion under management
Tracks the U.S. stock market, giving “special consideration to certain social criteria,” according to the firm’s website.
Holdings as of June included Occidental Petroleum Corp., Schlumberger Ltd., ConocoPhillips, Marathon Oil Corp.

The fund’s approach is to “include companies that are ESG leaders among their industry and sector peers,” said Manica Piputbundit, an associate at TIAA Global Asset Management, which manages $889 billion including more than $18 billion in ESG funds.

KLP AksjeGlobal Indeks I, a $3.7 billion fund

Invests in stocks listed in developed markets in accordance to KLP’s guidelines for responsible investment. All coal and tobacco companies are excluded.
Holdings include Exxon, BP Plc, Monsanto Co. Exxon was excluded from 2004 until 2009, when it was involved in a bribery case.
The fund aims to achieve “positive change through active ownership,” said Annie Bersagel, responsible investment adviser at KLP.

DNB Global Indeks, a $1.4 billion fund

Avoids companies responsible for “grave harm to the environment” and that don’t meet DNB’s “minimum ethical requirements,” according to its website.

Holdings include Exxon, Chevron Corp. and mining giant BHP Billiton Ltd. Weapons, tobacco and pornography companies are excluded, as well as those miners and power producers that get 30 percent or more of their income from coal.

ACTIAM NV’s $1.3 billion Responsible Index Fund

Tracks the MSCI North America Index, investing “exclusively in shares that meet the ESG criteria, as formulated by ACTIAM,” according to its website.
Holdings include British American Tobacco and Royal Dutch Shell Plc. Weapon producers are among the companies excluded.

“There are a some products or activities that directly lead to exclusion without prior engagement, but otherwise we see exclusion as a last resort,” Maxime Molenaar, an ESG analyst at ACTIAM, said in an e-mail response to questions. “We would first try to achieve improvements in the companies’ behavior.”

Pax World Management LLC, which manages ESG funds including the $1.9 billion Pax Balanced Fund

The Balanced Fund selects the best assets from a social and environmental perspective relative to their peers, according to Pax Chief Executive Officer Joseph Keefe, who said he doesn’t see the need for more definitive criteria in ESG investing.
Holdings include Occidental Petroleum because of its high ESG ranking, based on Pax’s analysis.

“There are a variety of strategies within sustainable investing funds because there are a variety of issues that investors care about,” Keefe said. “You want to design diversified portfolios to provide investors with the opportunity to achieve market or above-market return.”

Amundi Asset Management’s Atout Euroland $1.4 billion fund.

Its goal is to outperform the MSCI Euro Index by investing at least 75 percent of its assets in euro-zone stocks based on socially-responsible and ESG criteria, in addition to financial criteria, according to the fund’s prospectus. Amundi goes by “best-in-class strategies” rather than banning specific industries, and excludes the worst ESG-rated companies in each of them, the firm said in an e-mailed response to questions.

Holdings include Shell and Repsol SA.

“A policy of investing in the most efficient and least polluting issuers and avoiding the least efficient, for example, encourages companies and sectors to improve working practices and should reward investors through exposure to the best managed businesses,” a media representative for the firm said. “Blanket bans switch off dialogue and reduce incentives for managements to change.”

Espionage claims as tobacco war hots up

Aug 24th, 2016

by Editor.

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http://www.iol.co.za/news/crime-courts/espionage-claims-as-tobacco-war-hots-up-2060415

Cape Town – Serious allegations of espionage have been levelled against established cigarette manufacturers, including tobacco giant British American Tobacco of Southern Africa (Batsa), in a Western Cape High Court application lodged by Carnilinx, the manufacturer of low-cost brands.

Carnilinx claims that the Tobacco Institute of Southern Africa (Tisa), of whichBatsa is a principal member, has been carrying out covert, unlawful surveillance of its operations and tracking its vehicles in an effort to force it out of the industry.

Carnilinx is a member of the Fairtrade Independent Tobacco Association (Fita) with other low-cost brand manufacturers.

The two associations have been at loggerheads for some time and, in the court application, Carnilinx alleged that Tisa contracted private security firm Forensic Security Services (FSS) to conduct unlawful surveillance of its operations and track its vehicles.

Carnilinx also claims Tisa procured covert electric surveillance of its business premises, delivery vehicles and distributors, intercepted and detained its products, and reported its products to Sars and the police as illicit.

It sought an interdict against Tisa, which it claimed wanted to protect its members against those affiliated to Fita.

Tisa denied most of the incidents as well as the allegations of unlawful conduct.

The difficulty for Carnilinx, however, was the manner in which it lodged the proceedings.

By the time the case went to court, the parties agreed that the matter could not be decided on the papers only and Carnilinx applied to have it referred for trial instead.

In his judgment, Judge Lee Bozalek said the legal underpinnings of the case were certainly not made explicit in Carnilinx’s papers. It was only when it presented its argument that it revealed that it relied on breaches of certain rights.

However, he said there was “little value, if any” to be gained from referring the matter to trial. Judge Bozalek found, instead, that it was best that Carnilinx institute fresh proceedings.

He warned, however, that this did not mean he was suggesting that there was no merit in Carnilinx’s case.

British American Tobacco