Braking Down The News

Smoke Screen: BAT, bribes and spies in the tobacco industry

6

The candidates shuffled nervously in the waiting area. One by one, they were called into the interview room, where a panel of men fired questions at them about their past, where they worked and what they did there.

It was like any other job interview. Until it wasn’t.

The recruitment company was a front. The job adverts were fake. There was no new tobacco factory looking for staff.

There was no new job at the end of this process. Unless you count working as an informant on behalf of a multinational tobacco giant.

The scam was cooked up by two intelligence operatives at British American Tobacco (BAT), one of the world’s largest cigarette makers. The pair were members of a team set up to combat illicit trade in the tobacco industry and had flown in from London and sat in on the interviews to gather information on BAT’s much smaller rivals.

The questions were carefully tailored with the aim of helping BAT to instruct a private security firm whose staff included former apartheid era police officers on how and when to track and intercept its competitors’ lorries.

The recruiters were hoping to snag people with valuable inside knowledge and contacts; perhaps someone working on security or involved in distribution. They mocked up a website and business cards to spread the word. Often, though, the most effective tool was simply pinning a note on a workplace notice board.

And while the job they had applied for had never existed, some of the candidates were recruited to join BAT’s extensive network of corporate spies, secretly surveilling other tobacco manufacturers from inside their own factories. Some even believed they were working undercover for law enforcement.

It was just the tip of the iceberg of the efforts that BAT made to get information about their competition. BAT told the Bureau that “our efforts … have been aimed at helping law enforcement agencies in the fight against the criminal trade in tobacco products”.

However, a joint investigation by The Bureau of Investigative Journalism, BBC Panorama and the University of Bath has unearthed thousands of leaked documents that reveal a wide-scale corporate espionage operation at the heart of BAT.

The documents illuminated a shadowy world of spies and smugglers who had operated within southern Africa’s sometimes violent tobacco market, primarily between 2012 and 2016. BAT says its actions were lawful, and all in the name of clamping down on illegal cigarette trading.

Yet former BAT agents have claimed the company sabotaged competitors, infiltrated law enforcement agencies, paid bribes and carried out surveillance.

At the heart of the BAT operation was a triple agent called Belinda Walter, a lawyer who ostensibly represented BAT’s rivals, while spying on their actions for South Africa’s State Security Agency and, separately, BAT.

Her actions, and those of Francois van der Westhuizen, a whistleblower who used to work for a private security company employed by BAT, have helped expose the tobacco giant’s corporate espionage in South Africa.

At its height, the network of informants was some 200 strong, ranging from high-flying professionals to factory workers at rival tobacco businesses. Several were recruited and managed by senior executives based at the company’s London headquarters. Evidence suggests that even a BAT board director was likely aware of Walter’s spying.

One investigator in South Africa claimed that in his opinion the evidence he had gathered was “the most solid case of bribery … that’s ever going to land on the lap of South African law enforcement agencies or the UK … against British American Tobacco.”

However, BAT denies any wrongdoing and an investigation by the UK’s Serious Fraud Office (SFO) concluded earlier this year that there was insufficient evidence for any prosecutions.

The Bureau can also reveal how one of BAT’s operations spiralled out of control, resulting in discussions about the potential payment of a $500,000 bribe to Robert Mugabe, then Zimbabwe’s ruler, to remedy the situation.

The bribe was alleged to have been requested by an official in Mugabe’s Presidential Office in the lead up to the dictator’s successful 2013 re-election campaign, at a time when international sanctions and political turmoil had left his party, Zanu-PF, desperate for hard cash.

Know your enemy

Adriano Mazzotti knows what it is like to be in BAT’s sights. He is a director at Carnilinx, a tobacco manufacturer in South Africa.

“Whenever our trucks were moving they seemed to know,” he said. “Wherever our trucks were going they would turn up with the police. They would then either impound our stock or confiscate our trucks or just disrupt our business continuously.”

Mazzotti has in the past admitted to his company avoiding tax on some cigarettes, but he claimed BAT’s operations had harmed his legitimate business. “We’d never go to court, we would show our documentation, we would be able to justify what we were doing, and everything was returned to us,” he said. “But if you’re a small business it hampers your cash flow dramatically.”

BAT’s spying operation in southern Africa – South Africa, Zimbabwe, Botswana and Mozambique – was focused on smaller, local manufacturers such as Carnilinx, which make low-cost cigarettes, known as cheapies. The cheapies were undermining BAT’s dominance.

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With the South African market worth £1.5bn, there is cut-throat competition – some colourful characters among the local producers. But to compete against BAT, many of the smaller businesses coalesced under an umbrella group – a group that was, for several years, led by Belinda Walter.

Walter would eventually go on to present a series of explosive allegations, including that she was recruited to the State Security Agency (SSA) to spy on her tobacco company clients, including Mazzotti’s Carnilinx, before also being recruited by BAT to report on some of its smaller rivals.

An unsigned witness statement in her name stated that she had agreed in 2013 to hand over confidential information on her clients to BAT in return for £36,000 a year, despite already being an SSA agent. She was paid with Travelex currency cards as part of a system being run from BAT’s London office; similar payment tactics have been used by drug cartels and terrorist groups to avoid detection by banks and governments.

By 2014, however, Walter was unhappy with BAT. Seemingly fearing her work for the company might have breached the UK Bribery Act, Walter threatened to sue BAT for £5m in damages due she claimed to being made “party to serious illegal and unlawful activities”.

She withdrew the threat the following month, before apparently agreeing to provide testimony to the UK authorities a year later on behalf of Carnilinx. But when the time came to speak to the SFO and the Metropolitan Police, Walter allegedly refused to attend, leaving Carnlilinx without its key witness.

“We will disrupt the enemy. We will destroy their warehouses.”

BAT’s campaign to acquire information about Carnilinx and other small suppliers went much further than turning their lawyer into a double agent. The company had hired Forensic Security Services (FSS), a private security firm, who conducted an on-the-ground spying campaign that stretched from factory floor informants to illegal trackers on trucks.

Francois van der Westhuizenan, a former FSS employee and whistleblower, claims that FSS undertook a “systematic campaign of maximum disruption to the production plants and business” against a local tobacco manufacturer.

He claims this allegedly included espionage, “systematic” surveillance, seizing of products and “causing its distributors and staff members to be arrested”. BAT denies any wrongdoing.

It is claimed FSS paid informants in rival factories to provide photographs, shipments and production data and vehicle movements. It has also been alleged that the company gained access to the Johannesburg police’s CCTV network, and had access to the state automatic number plate recognition system – unlawfully. This would have meant FSS employees could track shipments and tip off police and customs officials to have the shipments seized.

Agents – many of whom were former police officers – are also alleged to have placed tracking “beacons” on vehicles. One employee allegedly dressed up in a black catsuit to place them undetected. In a 2015 affidavit, Lieutenant-Colonel Hennie Niemann from the South African police’s Crime Intelligence Division accused FSS of acting unilaterally and “unlawfully” in placing a tracking unit on a Carnilinx truck.

It even appears FSS may have illegally placed covert cameras inside people’s homes in order to spy on them – with full knowledge of BAT South Africa employees.

BAT had knowledge of some FSS operations undertaken on its behalf. High-tech spyware potentially enabled BAT staff to watch FSS operations live from anywhere in the world. It is understood that staff at BAT’s South African subsidiary were involved in some operational planning and meetings, requested daily updates on a number of FSS operations, approved payments to informants and even quibbled over agents’ minor expenses such as their mileage claims. BAT strenuously deny any wrongdoing.

Internal documents appear to show that FSS’s operations were effective.

On 6 June 2013, FSS and BAT launched “Operation Overlord”, apparently named after the Normandy D-Day landings on the same date in 1944. An internal PowerPoint presentation about the operation was distinctly Churchillian in tone: “We need to work as a unit, a lean mean fighting machine. We will disrupt the enemy. We will destroy their warehouses. We will blow up their supply lines.”

The bombs were metaphorical. The disruption was real. Internal reports suggest Operation Overlord damaged competition as well as sniffing out illegal cigarettes. An outline of the first three days suggested operations could also end up affecting competitors’ legal products, while an end-of-month review stated “the supply lines have been disrupted, but not that many [cigarette] sticks have been recovered”.

Inside the FSS

From the outside, the murky actions of the FSS seem rooted in its make up – its agents included former South African police officers who came of age in the apartheid era, including some high-ranking members of the notorious Unit 9 riot squad.

In the opinion of van der Westhuizen, “FSS was purely a company that ran on the same system that the apartheid police used to work on … We were running a parallel police investigation, a parallel police network, but based on apartheid policy.”

But its overall operations for BAT were directed by BAT based in the UK. It was some of these British employees who were involved in the Travelex payment scheme that paid Belinda Walter, and who acted as her handlers.

Van der Westhuizen claims that these BAT employees were aware of the general manner in which FSS operated. In fact, he had driven some of them around when they visited South Africa to train FSS agents.

It was on one such visit in August 2012 that BAT introduced its scheme to lure in new informants from its rivals. In other operations, the British BAT employees seemingly tried to conceal their involvement. Leaked documents show that one made cash payments to informants working for Gold Leaf Tobacco, a competitor, as part of an operation called Oudtshoorn. The payments were routed through a company called Vixen & Associates, listed in the name of an FSS director’s wife.

BAT was paying FSS roughly £5m a year for its private security services, and also sent more work to the business through a now defunct body called the Tobacco Institute of Southern Africa. The institute was primarily funded by BAT and was also paying FSS.

Through the Tobacco Institute, BAT employees were able to obtain a seat on South Africa’s influential Illicit Tobacco Task Team, which included representatives from the SSA, the South African police and the National Prosecuting Authority. It helped BAT to present operations against its rivals as solely attempts to enforce the law on cigarette smuggling.

A principal focus of the task team’s attention was the smaller, local tobacco companies in southern Africa – the umbrella group represented by BAT’s spy, Belinda Walter. She would later claim that the group itself had been set up at the behest of the SSA as a means to spy on BAT’s rivals.

The task team seat lent authority to BAT and FSS’s operations. However, Telita Snyckers, a former employee of South Africa Revenue Service, analysed more than 100 cases launched by the Tobacco Institute and FSS against smaller independent companies in the first half of 2014. “And you know what?,” she said, “I couldn’t find one mention of a conviction. Not one.”

Despite being specifically asked by the Bureau, BAT has not provided any evidence of successful prosecutions off the back of information provided by Walter or FSS.

And yet, despite that apparent lack of success, informants and agents working for FSS and on behalf of BAT sometimes placed their lives at great personal risk. Agents were on the receiving end of violent incidents, including an alleged arson attack and even the mysterious death of one agent.

One informant was paid 2,000 rand in cash (approximately £130 at the time) for intelligence that eventually resulted in him and his family relocating because they believed their lives might be in danger, according to a leaked document.

Van der Westhuizen claims that some informants believed they were acting on behalf of law enforcement, not a tobacco company.

Unaccountable

At the very least, BAT’s activities in South Africa and Zimbabwe suggest the company could have broken its own anti-corruption policy, which states that “corruption causes distortion in markets and harms economic, social and political development, particularly in developing countries”. However, concerns were also raised that BAT may potentially have violated UK law.

The Bureau understands that the South African tax authority notified HMRC of BAT’s Travelex card payment system in 2013. It also told HMRC it knew of eight people in South Africa who were paid via Travelex cards, and that the system was run by a senior BAT executive.

As yet no public authority has taken BAT to court over its actions in southern Africa. The company had faced scrutiny for its actions in Kenya, when a BBC Panorama programme exposed its bribery allegations in east Africa in a 2015 documentary. However, the SFO announced in January this year that its investigation into BAT had revealed insufficient evidence for any prosecutions.

Earlier this year, a Kenyan-based journalist working for the Bureau was offered a bribe by a representative of a company working for BAT in order to leak a “dossier” of details on another investigation.

In South Africa, Johann van Loggrenberg led an investigation called Project Honey Badger into the tobacco industry, including BAT’s activities for the South African Revenue Service. He told the Bureau: “The evidence in my view is completely indisputable, completely. It’s the most solid case of bribery … that’s ever going to land in the lap of South African law enforcement agencies or the UK or anywhere else for that matter against British American Tobacco.”

But the investigation fell apart after it emerged he had had a brief romantic relationship with a BAT spy between October 2013 and May 2014.

The spy’s name? Belinda Walter.

The emergence of the relationship, and accusations made by Walter against van Loggerenberg and his employer, would set in motion events that would eventually close van Loggerenberg’s entire unit. The Revenue Service was accused of containing a ‘Rogue Unit’ that spied on taxpayers and targeted political opponents – based on a number of lies it would take van Loggerenberg six years to disprove.

The chaos of the Rogue Unit saga, and other ongoing scandals of government and justice in South Africa, made it less likely that BAT’s alleged activities in the country could be adequately assessed. Those who wanted to see the company fully investigated for their alleged actions instead turned their eyes to London, where it is headquartered, and where the Serious Fraud Office (SFO) exists to investigate and prosecute any serious, complex crimes.

The SFO officially opened an investigation into BAT’s activities in Africa in 2017. Van Loggerenberg handed over some of his findings and offered to give the SFO full access to his evidence and testify, as did the FSS whistleblower van der Westhuizen. But in four years of investigating, they say that neither were invited to an interview.

In January of this year, the SFO dropped its investigation, citing insufficient evidence. Despite being yet another failed fraud investigation, costing the UK taxpayer millions of pounds, the announcement failed to even make the evening news.

“I think it’s a disgrace,” van Loggerenberg told the Bureau. “[The SFO] haven’t seen my evidence, so how would they know?”

BAT told the Bureau: “Our efforts in combating illicit trade have been aimed at helping law enforcement agencies in the fight against the criminal trade in tobacco products … BAT fully cooperated with the SFO’s subsequent investigation, which included allegations relating to South Africa. In January 2021 the SFO announced that, ‘following extensive investigation and a comprehensive review of the available evidence’, it had closed its investigation into BAT, its subsidiaries and associated persons, without charge.”

The SFO told the Bureau: “There is a high bar for the SFO to charge individuals or companies with a criminal offence. Where the evidence does not support a potential conviction, it would not be in the public interest for us to continue with our investigation.

“We continue to assist our international law enforcement partners with ongoing investigations related to this matter.”

Reporters: Matthew Chapman, Victoria Hollingsworth, Alon Aviram, Malcolm Rees
Desk editor: Chrissie Giles
Global editor: James Ball
Investigations editor: Meirion Jones
Fact checker: Alice Milliken
Impact producer: Paul Eccles

Production: Frankie Goodway
Legal team: Stephen Shotnes (Simons Muirhead Burton)
Illustrations: Daniel Stolle

Our reporting on tobacco is part of our Global Health project, which has a number of funders. The Big Tobacco project is funded by Vital Strategies. None of our funders have any influence over the Bureau’s editorial decisions or output.

 

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