Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses(Questions 480-499)



  480. What did you do?
  (Mr Davis) We ceased trading.

  481. Mr Wells, could you state which countries you asked Imperial to stop exporting to and whether they immediately complied with your request?
  (Mr Wells) We issued red cards in respect of customers in a number of different countries. I think the number of red cards was 15, one of which we withdrew, that leaves 14. They are in a variety of different countries, they include Afghanistan, Moldova and Latvia. In a number of cases supply continued for some considerable time after those red cards were issued.

  482. How much longer?
  (Mr Wells) 10 months, of that sort of order.

  483. So that product was leaving UK factories for ten months after you had asked them for it to stop?
  (Mr Wells) I think in the case of Latvia and Moldova cards were issued in February 2000 and supplies continued until September and November 2000 and 2001 respectively.

  484. Why did you, Mr Davis, carry on supplying?
  (Mr Davis) I am not quite sure that is absolutely accurate.
  (Mr Dibble) I think the facts are wrong with the dates, red cards, yellow cards and when did we stop. The bulk of the cards were issued to us in February 2001 and, looking up Customs' own submission, there seems to be a suggestion that we ignored them and kept supplying. In fact from their own figures and their own table, they point out that in most of these countries we stopped supplying far in front of the issue of the card. If you take the last one, bottom of the list, Uzbekistan, card issued 21 February 2001, supplies continued to be made after the issue of the yellow card, last supplied in March 2001, which I make about eight days after the card was issued. I do not think we could have responded much more quickly in these cases. We, as Mr Wells rightly pointed out, were issued with cards. One was a red card which was later withdrawn because it was issued on erroneous or very spurious information which Customs had, so that was a bad basis on which to issue it. With the other cards, we went in ourselves, we made our own market checks, we know our distributors, we investigated the markets. On the Afghanistan one we had two seizures from Afghanistan when the card was issued to us; two in a whole year. Very, very low volumes, a very, very small proportion of what we sent there, nonetheless we went into Afghanistan—not myself, I hasten to say—we investigated, and the proof of the pudding is in the eating, we have stopped trading.

  Mr Bacon: I have run out of time, I will have to leave it there. Thank you.

Mr Williams

  485. Mr Davis, I was disappointed to hear you say you were surprised, disappointed and concerned—they were your words—at the allegations made at the last Committee of Public Accounts. We do not usually like to malign our witnesses. That is not a question, just an observation. Can I take you back to the quote from your manager of external affairs, Mr Sadler. What he said was, "We do not want only foreign brands to be imported into the UK", now that can only mean he wanted your brands to be imported into the UK. That is straight forward language, no slips of tongue, it is clear, is it not? Or are you going to try and put some slightly topsy-turvy interpretation on it?
  (Mr Davis) No, I do not wish to put a topsy-turvy interpretation on it.

  486. In that case, as we have got that guarantee, let's go to the second bit. "It's important that whatever is going on, our brands are not excluded from it." That is pretty explicit, is it not?
  (Mr Davis) Indeed and this is in the context—

  487. It is simple and straight forward, you want a share of the action.
  (Mr Davis) It is in the context of British smugglers bringing product back from Spain and countries like that. Yes, we want our brands to be bought in Spain by British consumers who are going to buy—

  488. No, this was not bought in Spain, no, no. Don't try and side-step. This is imported back into the UK, that is what he said, and you just said you agree with him. Do you agree with him or do you not agree with him? Yes or no?
  (Mr Davis) I also said earlier to a previous question on the same subject that I think Mr Sadler was taken very much out of context—

  489. You cannot put it out of context. You must live in a dream world. We understand the language here. You cannot be more explicit than to say, "We do not want only foreign brands to be imported", we want our brands to be imported, in other words, and, "Whatever is going on it is important our brands are not excluded", even if it is illegal. That is what he is saying.
  (Mr Davis) No, he does not say that at all, sir, with respect.

  490. To me it sounds as if it is almost an admission of complicitness in a criminal activity.
  (Mr Davis) With respect, sir, it was in the context of people bringing cigarettes back from EU duty-paid markets—

  491. We are not talking about that. That is not importing.
  (Mr Davis) That was the context—

  492. That is not importing. He is one of your top external managers and he does not understand what constitutes an import. Are you telling us that?
  (Mr Davis) What I am saying, and I think I have outlined today what the company's policy is and it has our total support, and the interpretation you are putting on Mr Sadler's remarks is not correct and does not comply with the company's policy. I cannot say fairer than that, I do not think.

  493. You have just repeated what you have said and you agreed with what he said and what he said is clear. I remember an occasion when a civil servant became notorious for his claim he had been economical with the truth, I think you are being positively parsimonious with the truth as far as this Committee is concerned. Let us go back to the period when you were not co-operating, you have admitted you were not co-operating—
  (Mr Davis) No, I have not admitted we were not co-operating at all.

  494. Yes, you did, you said in the early years—
  (Mr Davis) No, I did not.

  495.—and you are putting things right.
  (Mr Davis) No. What I said quite clearly is we were surprised and disappointed, as I was, at the meeting with Mr Byrne on 16 April at the charge of lack of co-operation, or "co-operation could be better" as it was put, because we considered we had a long track record over decades of close co-operation with Customs, and that is why I was so disappointed. What I said quite openly is, if there are areas where they feel there could be more co-operation, we are more than happy to do that.

  496. Can I ask Customs again, I know this has been referred to already, but you said you had less than full co-operation, what is it specifically? They claim they cannot find any difference in their co-operation and other people's. What specifically are the other companies doing or have they been doing which Imperial is not?
  (Mr Wells) If I can give you some examples. In the note which Imperial have given to the Committee, they acknowledged that last year their responses to the tracking and tracing requests took about nine weeks. They acknowledge, and it is certainly the case, that recently that has speeded up. Nonetheless, that was a good deal slower than we had from other companies.

  497. Did that hinder your activities?
  (Mr Wells) Certainly the speed with which we can track and trace product is obviously helpful in then being able to identify where the customer and suspect areas are. Equally, we find the highest proportion of returns to us which do not lend us to differentiate a particular company, in other words the response is that it is not possible to identify the particular customers to whom the goods were supplied, is just under a third in the case of Imperial, and that is higher than in respect of other companies with whom we undertake tracking and tracing. That is one example. I know your time is limited so perhaps I can leave it at that for the time being.

  498. So by not co-operating with you, they were quite unintentionally co-operating with the smugglers?
  (Mr Wells) I do not wish to ascribe a reason as to why the tracking and tracing was slower, I simply say it was slower.

  499. Okay. We have heard a lot from you, Mr Davis, about your triple whammy and our heart bleeds for you because we realise you are suffering. It does not show in your profit figures though. Your profit figures over the last five years have varied very little at all, they are relatively constant. Before you say, "Ah, they would have gone up massively if it had not been for the smuggling", one has to say, in that case, why did they not go up massively before the smuggling?
  (Mr Davis) You have quoted our profits over the last five years and Imperial's profits have grown steadily since the 1980s, be it under independence or under Hanson ownership. So our profits—

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