Big Tobacco Smuggling

The multi-million dollar trade route

LONDON, August 22, 2001 — When Kenneth Clarke formally became deputy chairman of British American Tobacco in 1998, the documents that have now surfaced suggest that – unknown to him – one of the firm’s exclusive distributors, Romar Freezone Trading, was smuggling at least $12m worth of cigarettes a month into Latin America from Aruba, the tiny Dutch dependency off the Venezuelan coast.

The scale of this smuggling route alone would have made a lucrative contribution to BAT’s 719bn annual worldwide “stick” (cigarette) sales.

Romar’s operations, if the documents are to be believed, may only have been a fraction of BAT’s global “transit” (smuggling) trade whose structure is discreetly centralised in Switzerland.

Hundreds of pages of accounts, sales and marketing reports have been supplied by whistleblower Alex Solagnier. During 20 years with the Romar agency and its predecessors, he says the BATtransit trade through Aruba rose by 1998 to 45,000 cases a month. Each case contained 10,000 cigarettes.

Solagnier had just become a director of Romar when, in July 1990, BAT regional director Peter Hazel visited Aruba to meet Romar’s boss. According to company papers, “the objective of this visit en route to London was to acknowledge the increasingly important amount of business they were doing for Biggott [a BAT subsidiary]. They enlightened me on what is really rather a murky business – my main concern I must say being whether drugs money could be being used”.

The invoices show floods of cigarettes flowing into Aruba from the US, Venezuela and Brazil, manufactured by BAT subsidiaries in each country. According to Colombia’s customs authorities, during 1998 only 16.8m BAT cigarettes were legally imported. But 8bn were shipped by Romar from Aruba to the northern trading outpost of Maicao in Colombia, where a dozen further agents shipped the contraband into black markets across the country.

Until now, BAT’s position has been to admit that smuggling takes place but to deny any knowledge of where companies like Romar send the cigarettes they purchase. This is “completely untrue”, says Solagnier. “They controlled and planned what we did.”

BAT’s control of the smuggling operation, he says, included twice-weekly surveys in Maicao on the mainland to check stock levels and prices for each brand. The information was then faxed to a BAT manager in Costa Rica.

Until 1995, according to Solagnier, BAT received the survey information from their own employee on the mainland in Maicao.

The reports were faxed directly to BAT (UK and Exports) in Woking in Britain and to Biggott, the Venezuela-based manufacturer of Belmont cigarettes, the main smuggled brand.

But in 1997, in an apparent increase of caution, they were told to fax sales re ports only to the Costa Rica office, which would send the information on to Geneva.

The company signed a “consignment agreement” with Romar over their huge stocks, stipulating that the Belmont cigarettes remained BAT’s property, until they had been disposed off in Maicao and a “depletion report” had been sent to Geneva.

By the mid 1990s, Venezuelan and Colombian authorities were aware of the smuggling trade through Aruba, Solagnier says. At BAT’s suggestion, Romar established two new companies in order to reduce their visibility, Interex of Panama and Arcubon of the island of Curaçao.

During 1998, according to Solagnier, BAT also smuggled cigarettes into Brazil. The scheme involved shipping Brazilian-made cigarettes duty free to Aruba island, and then having them re-enter Brazil across its border with Venezuela. In 1998, Romar staff visited Venezuela and made plans for a new warehouse at the border outpost of Santa Helena, en route to Brazil’s Amazon capital, Manaus, Solagnier says. But the plan was thwarted when the Brazilian government slapped a 150% tax on cigarettes exported to other parts of Latin America.

BAT documents from Switzerland presented by Solagnier reveal a bizarre tale. Shipping documents and invoices show that, by late 1999, the company was sending at least two containers a month (nearly 20m cigarettes) from Brazil to Finland. But the cigarettes do not appear to have been sold there.

BAT International put the cigarettes on ships from Helsinki back to Aruba. From there, they could re-enter Colombia, Venezuela or Brazil itself.

We asked BAT for an explanation. They told us yesterday: “The stock of the Hollywood brand in Finland was intended for sale in Europe. When the sales did not materialise, stock was sold to Romar.”

Read more
Inside Big Tobacco Smuggling
How Clarke defended company
May 14, 2012 — BAT’s Kenneth Clarke was called before the Commons all-party health committee, chaired by Labour MP David Hinchliffe, after the original disclosure that BAT stood accused of complicity in cigarette smuggling.