CRIME LINK TO TOBACCO GIANTS

SUNDAY EXPOSE

A year-long investigation has found that senior officials at British
American Tobacco, Philip Morris and R.J. Reynolds worked closely with
companies and individuals directly connected to organised crime in at least
five countries.

The investigation estimated that one in every three cigarettes exported
worldwide was sold on the black market.

Triad groups in Asia, the Italian Mafia, eastern European gangs, Colombian
drug cartels, and motorcycle gangs and the Mafia in North America were
involved in tobacco smuggling.

"Licensed distributors for the manufacturers feed these organised crime
syndicates billions of cigarettes worldwide, often with corporate
knowledge," the investigation report says. It also details how tobacco
company officials worked closely with organised crime groups in Hong Kong,
Canada, Colombia, Italy and the US.

The investigation was conducted by the International Consortium of
Investigative Journalists, which has 74 investigative reporters and editors
in 41countries, and is an arm of the Centre for Public Integrity, a
non-partisan, non-profit-making investigative watchdog based in Washington.
(Sunday Age senior reporter Bill Birnbauer is a member of the consortium.)

Tobacco manufacturers have often blamed international smuggling of their
products on organised crime and denied any involvement.

But corporate documents, court records and government reports - some dating
to the 1970s - show that BAT, Philip Morris and R.J. Reynolds orchestrated
smuggling networks variously in China, Canada, Colombia, South-East Asia,
Europe, the Middle East, Africa and the US as an important part of their
strategy to increase profits.

Corporate documents refer to this black market business as "duty not paid",
"parallel" markets, "general trade" or "transit". They often clearly
delineate between this aspect of the business and legal trade.

The investigation found one Triad-backed distributor in Hong Kong sold
about $2.3 billion of BAT cigarettes into black markets in China and
Taiwan. A former director of the distribution company, who was later
murdered, told investigators three BAT Hong Kong executives were paid $24.5
million in bribes to ensure supplies.

An Italian government report states that Philip Morris' and R.J. Reynolds'
licensed agents in Switzerland were high-level criminals who ran a vast
smuggling operation into Italy in the 1980s directly linked to the Sicilian
Mafia.

In Colombia, tobacco companies are alleged to have helped launder drug
money and worked closely with distributors involved in drug trafficking. A
Colombian law suit against Philip Morris and BAT accuses them of
involvement in drug money laundering through what is known as the "black
market peso exchange".