Justice

Serious Fraud Office probe into tobacco giant BAT on ‘bribery’ claims

British American Tobacco is under formal investigation by the Serious Fraud Office over bribery allegations, the second major blow in less than a week.

Shares in the Benson & Hedges-to-Pall Mall giant plunged 11% on Friday when the US Food and Drug administration unveiled plans to cut nicotine in cigarettes.

They kept falling on Tuesday, another 69p to 4803p, after BAT revealed the SFO probe into “allegations of misconduct”.

Panorama alleged BAT made illegal payments to politicians in east Africa and others working for rival companies in November 2015.

BAT said today: “As previously announced, we are investigating, through external legal advisers, allegations of misconduct… British American Tobacco has been informed that the SFO has now opened a formal investigation. BAT intends to co-operate with that investigation.”

It said earlier it takes the issue “extremely seriously”.

Chief executive Nicandro Durante said in an interview in March that “we are in 200 countries, so I cannot give a 100% guarantee that everything’s going to go by the book”.

The bribery claims were revealed by whistleblowing former employee Paul Hopkins, who worked for BAT in Kenya for 13 years.

The former Irish army ranger said a BAT lobbyist arranged bribes for officials in Rwanda, Burundi and the Comoros Islands.

The SFO probe comes at a tricky time for BAT. It has just completed the £38 billion takeover of America’s RJ Reynolds.

That deal sees BAT grab the 58% of Reynolds it didn’t already own, creating a tobacco behemoth second in size only to the state-run China National Tobacco Corporation.

The SFO confirmed it is looking at “suspicions of misconduct” by BAT.

It fined Rolls-Royce £497 million this year over bribery allegations, which suggests it could be looking for a similar punishment for BAT if the agency finds it guilty.

The SFO could bring criminal charges leading to jail sentences, however, if it thinks the allegations are serious enough.

City analysts think the FDA move could prove more damaging to BAT in the long run. The US watchdog wants to cut nicotine in cigarettes to non-addictive levels.

FDA commissioner Scott Gottlieb said: “Because nicotine lives at the core of both the problem and the solution to the question of addiction, addressing the addictive levels of nicotine in combustible cigarettes must be part of the FDA’s strategy for addressing the devastating addiction crisis that is threatening families in the US.”

The FDA move could undermine the rationale for the Reynolds deal. It was supposed to mark BAT’s return to the lucrative US market after a 12-year absence. If the regulatory clampdown is as serious as the FDA suggests, profits could turn out to be much lower.

from the: Eveningstandard