‘Defensive and reactionary’ Imperial Tobacco face hard questions at AGM
Tuesday 05 February 2002
Imperial Tobacco to face hard questions from shareholders over profit from smuggling.
Despite increased profits this year, Imperial Tobacco faces a tricky time in the coming months as concerns continue to grow regarding its alleged complicity in profiting from tobacco smuggling, and the revelation that this might leave Directors open to criminal charges. The Company’s reputation is still suffering as a result of the mauling it received from a House of Commons Select Committee, which described it as “defensive and reactionary”, and its Chief Executive Gareth Davis’s promises as “worthless”. To mark Imperial’s Annual General Meeting in Bristol on 5 February, ASH is casting an eye over the company’s conductin the past year, and asking pressing questions that should concern shareholders.
ASH Public Affairs Manager John Connolly said:
“It takes some doing to be singled out as the tobacco company with the worst record on the health risks of smoking – the competition for this title is really very strong. Shareholders have a right to be worried about the positions which have been taken by Imperial.
While Imperial crows about its increased profits and market share, it’s important to remember where these come from. All of the increase has come from overseas sales. Over half of Imperial’s sales overseas return to the UK as smuggled goods – costing the UK taxpayer billions in unpaid tax.. Imperial are still not taking any effective measures to stop this, even though they claim to be opposed to cigarette smuggling. They claim that what happens to their cigarettes after they sell them is not their problem. However, our advice from lawyers is that if a tobacco company sells cigarettes to a wholesaler, knowing that they will be used in a smuggling operation, then they are breaking the law themselves.” 
Evidence showing the extent to which Imperial benefits from cigarette smuggling is overwhelming. The company has exported enormous quantities of two of their brands – Regal and Superkings- to countries such as Cyprus, where the market for these brands is tiny. These cigarettes are then smuggled back into the UK where they appear on the black market – sometimes within a week of their original export. Over half of Customs seizures in the UK are of these two brands, and on the basis of Customs’figures for seizures, almost two thirds of Imperial’s exports return to the UK as contraband – around 13 billion cigarettes a year.
“There is just no credible way that Imperial can’t know that this is happening. Smuggling contributes tens of millions of pounds to their profits every year, and any well-run business is bound to notice if they are exporting huge quantities of products which then vanish when they reach their destination. ASH’s view is that they are turning a blind eye to a criminal practice which helps their export figures. Imperial have to explain why they are not taking the steps they could to stamp out this trade. They claim to be anti-smuggling. It’s time for them to back this up with action.”
Questions for the Board:
What are the company’s Directors doing to end the large-scale smuggling of their products?
Will the Board agree to set up an independent inquiry into the smuggling of their products?
ASH estimates that over half of their overseas profits are derived from cigarettes which end up being smuggled back into the UK. If Imperial Tobacco disagree with this figure, what is their estimate?
In 2000, the House of Commons Health Select Committee held an inquiry into the Tobacco Industry. The conduct of all of the main tobacco companies was criticised in the Committee’s report,but Imperial was singled out for special criticism. MPs were angered by the refusal of its Chief Executive, Gareth Davis, to admit that smoking caused serious diseases, and by the company’s refusal to make its internal documents public – a decision they described as “lamentable”. The Committee said that“Tobacco companies should produce the least harmful product possible” but that,“we are totally unconvinced that Imperial Tobacco can be committed to producing such a product while its public stance is to refuse to accept that cigarettes are intrinsically unsafe”. The Committee also criticised Davis for his lack of co-operation, saying that his “promise to co-operate with the Committee in what ways he could proved worthless”.
“40 years after we found out just how dangerous smoking is, Imperial tobacco are still trying to wriggle out of admitting the quantity of disease caused by their products. This would be laughable were it not for the fact that Imperial’s cigarettes kill almost 50,000 people in the UK every year. If the company won’t admit the basic fact that cigarettes kill, it’s difficult to believe anything else they say. All of this shows why tobacco companies need to make their internals documents available to public scrutiny – to show what they knew about the dangers of smoking and when.”
Questions for the Board.
Does Gareth Davis regret his reluctance to assist the Select Committee? How much does he feel his stance,and that of the company, on these issues has harmed their reputation in Westminster and beyond?
Notes to Editors:
 ASH asked Roy Amlot QC for advice on offences that may have been committed by a tobacco company which facilitated smuggling into the UK. His advice is available on the ASH website at http://www.ash.org.uk/html/smuggling/html/smugglingadvice.html
 ASH’s report on Imperial’s Links to Smuggling:“Imperial Tobacco Plc: profit and growth from smuggling” is available on the ASH website at http://www.ash.org.uk/html/smuggling/html/imperialshort.html