|
The newsletter of Airspace Action on Smoking and Health. Articles on cigarette smuggling, cigarette advertising, and Provincial Government investments in the tobacco industry. Click here for a PDF version of this document.
The following is
excerpted from an article by William Marsden, an investigative
journalist at Montreal's The
Gazette. A link to
the full article, published in the Gazette on October 19, is on
Airspace's website.
On July 31, after a year of
secret negotiations, Canada's two largest tobacco companies -
Imperial Tobacco Canada and Rothmans Inc. - pleaded guilty to
aiding and abetting tobacco smuggling from 1989 to 1994, defrauding
Canadian governments of more than a billion dollars in unpaid taxes.
Imperial Tobacco, maker of 16
cigarette brands including Canada's top sellers Players and du
Maurier, agreed to pay US$582 million for "aiding persons to sell
or be in possession of tobacco products manufactured in Canada that
were not packaged and were not stamped in conformity with the Excise
Act" while Rothmans, parent of Rothmans, Benson & Hedges Inc.
and maker of 16 cigarette brands, agreed to US$534 million.
Key to the settlement was the
government's readiness to release all former and present
executives, employees, directors and officers from civil or criminal
prosecution. Also released were the companies' foreign owners and
affiliates. Tobacco bosses who oversaw the smuggling could now live
out their retirements without fear they might be interrupted by a
spell in prison. It wasn't an idle fear. Two former executives
with Canada's third largest tobacco company, RJR Macdonald, have
been convicted. One served four years in jail. Six others are
awaiting trial or procedures that could eventually send them to
trial.
Paul Finlayson, a former
executive with Imperial's holding company Imasco Inc., recalled
that after the RCMP raided Imperial Tobacco's head office in
Montreal in November 2004, they contacted him because his name was
on some critical documents. "Don [Brown, president of Imperial]
should have ordered that stuff destroyed. I mean that should have
been for your eyes only. . . It was not ever intended to be stored
or kept after presentation."
One of those documents, he
added, was a planning document for exporting Imperial brands into
the United States to be sold to smugglers. Finlayson said he drew up
the plan and "The police could've walked in and handcuffed
everybody at Imperial Tobacco. But the government didn't have the
guts of a field mouse."
Even though the
fines and penalties set records in the annals of Canadian
white-collar crime, they were a pale reflection of the staggering
amounts that smugglers had defrauded governments during the early
1990s, when as many as one in every three cigarettes sold in Canada
was contraband. After the Canadian government doubled tobacco taxes
in 1991, Imperial alone earned annually $600 million to $700 million
in net profits "lubricating" the smuggling through its supply of
cigarettes, according to Finlayson. At the height of the smuggling,
Imperial, Rothmans, and RJR were selling an estimated 10 billion
cigarettes a year into the illicit market, or about 20 percent of
their total production, amounting to a tax loss for Canadian
governments of more than $1 billion during the peak year in 1993.
In reality, the government
likely had very little choice but to settle for a relatively small
amount, since Canada's three major manufacturers had successfully
used their global reach to insulate their assets from seizure.
Corporate and court records show that over the last 10 years, the
companies sold off or transferred assets, rendering them out of
reach to Canadian tax collectors. Both the federal and Quebec
governments have petitioned the court to have these transactions
reversed, claiming they were designed to "reduce the value of its
assets and to try to fraudulently shelter its shares" against
seizure.
Imperial Tobacco
moved its manufacturing to Mexico and was reduced to little more
than a shell in Canada with a head office in Montreal. By the time
Canadian governments got around to pursuing Big Tobacco, the
companies were little more than shells with rights to a few popular
tobacco brands, owned by offshore companies. This reduced government
leverage to the threat of criminal prosecution and the seizure of
future revenues.
The settlement has
left RJR out in the cold. The company, now called JTI
Macdonald after its 2000
purchase by Japan Tobacco, faces about $10 billion in claims from
various Canadian governments.
Marc Ander
As
many Georgia
Straight
readers are now aware, the free Vancouver weekly is one of a number
of Canadian publications running full-page cigarette ads. And these
aren't just the tobacco sponsorship ads that many more established
publications such as the Sun and the Province ran in the 90s, but
ads proudly displaying cigarette packs, which would have been
illegal in the 90s. Some ads don't even bother with the health
warnings that were required in the 90s.
The
Straight
began running ¾-page snuff ads in May 2007, followed quickly by
full-page cigarette ads by Canada's third-largest tobacco company
JTI-Macdonald, which was fined $1.36 billion in 2004 by Revenue
Quebec for smuggling its own cigarettes back into Quebec to evade
taxes and is facing another $10 billion in claims from other
Canadian governments. Imperial Tobacco, Canada's largest tobacco
company, began running full-page cigarette ads in the Straight
in April 2008, with many issues running three or four full-page
cigarette ads.
What's
that you say? Haven't we banned cigarette advertising in Canada?
Well,
not really. In 1988, the Conservatives under Brian Mulroney brought
in a tobacco-advertising ban, but the industry lobbied for and got a
loophole which allowed them to advertise the name of their tobacco
company. Why they pressed so hard for this loophole became
immediately obvious: the companies quickly set up fake no-employee
shell companies with names of their cigarette brands, which allowed
them to continue advertising cigarette brands as usual.
And
even that weak legislation was struck down by the Supreme Court of
Canada in 1995. Current legislation allows cigarette advertising in
publications where youth readership is under 15%, and doesn't even
require the health warnings that used to be mandatory. Canadian
tobacco companies had voluntarily stopped running tobacco ads in
publications for a few years prior to last year while the matter was
being tossed about in the courts, but now they're back in full
swing.
While
the vast majority of Canadian publications have voluntarily refused
tobacco advertising since the 90s, the Straight
has a long history ignoring ethics and accepting any kind of ad
that's not legally prohibited. Perusing its classified ad section
is not something for the faint-of-heart. Airspace's Grim Reaper
has had many colourful run-ins with Straight
staff while protesting in front of its offices.
Today
many countries including the European Union have banned tobacco
advertising. Canada has ratified the Framework Convention on Tobacco
Control, an international treaty which requires us to either ban all
tobacco advertising by 2010 or demonstrate why our constitution
prohibits us from doing so. So far, the Conservatives have done
neither. Canada was once a proud leader in tobacco control, and now
we are in danger of running afoul of the most basic provisions in a
treaty signed and ratified by 160 nations.
On September 17 in the midst of
the election campaign, Prime Minister Stephen Harper's office sent
out a press release promising to amend the Tobacco Act to ban "all
tobacco advertising and promotion in print and electronic media
which may be viewed and read by youth." Why they don't simply
adopt a complete advertising ban as the Framework demands is a
mystery. And it remains to be seen if this is one of the election
promises they plan to keep, what year they plan on keeping it, and
whether it will have as many loopholes as Mulroney's legislation.
Harper also said
during the election campaign that his government would ban the sale
of flavoured cigarillos in Canada. Knock yourself out, Stephen.
Marc Ander
Reporter John Daly of Global TV
did some research, and learned that the BC Investment Management
Corporation (bcIMC), which manages investments for public bodies and
public sector pension plans, is a heavy investor in the tobacco
industry.
In response to a letter
complaining about this, then-Finance Minister Carole Taylor wrote
that bcIMC's Directors "must by law put the interests of the
beneficiaries at the forefront."
Oh, really? One of
the companies that bcIMC invested in was Philip Morris
International, a company set up specifically to sell cigarettes
outside of the United States. They recently bought up Rothmans, to
make it easier for Rothmans to pay their share of the settlement
discussed on page 1 in this issue. How do we beneficiaries benefit
from this investment? Well, we make some bucks from selling
cigarettes all over the planet.
Our public funds are also
invested in British American Tobacco (a company that the government
says it intends to sue), Altria Group (convicted of civil
racketeering in 2006), and UST Inc. (purveyors of smokeless tobacco;
guess we had better forget about this stuff being outlawed).
Robert
Broughton
White
Rock City Council has unanimously passed a bylaw prohibiting smoking
on White Rock's beaches and promenade. It will go into effect on
November 1.
The
bylaw also bans smoking in enclosed and partially enclosed transit
shelters, vehicles for hire and in outdoor gathering places,
including sports fields and playgrounds. Council made a decision in
2007 to make White Rock a smoke-free community by 2010.
Airspace
thanks Councillor Matt Todd and Mayor Judy Forster for their effort
in making this happen.
Discussions
will be taking place among the Vancouver Park Board staff and Board
members in early 2009 with a view to getting a number of Vancouver
"family" beaches designated smoke-free in time for the
2009 beach season.
Robert
Broughton
Project A.B.L.E. (A
Better Life for Everyone) is a humanitarian aid effort in Malawi
that is supported by Airspace. One of the things that Project
A.B.L.E. is doing is lobbying Malawi's government to help farmers
convert their crops from tobacco to jatropha, a feed stock and
bio-fuel source.
Here's an
especially big thank
you to those who have
already so generously donated to Project A.B.L.E.
If you would like
to donate, please send your cheque to: Airspace Action on Smoking
and Health Box 18004, 1215c 56th St. Delta, B.C. V4L 2M4 And please
be sure to write "Project A.B.L.E." in the "memo"
space. You can also contribute via PayPal (click button below).
For more info about
Project A.B.L.E., please contact Tamina Gurd via e-mail,
taminac AT shaw.ca.
Errol Povah
|
