Finale of Lui case. Judge VERY critical of BAT/B&W (fwd)

[Robert Weissman <rob@essential.org>]

A series of Hong Kong articles on the BAT smuggling case follows:


South China Morning Post, Hong Kong Internet Edition  
Thursday June 25 1998  
Judge blasts tobacco firms as Jerry Lui sentenced  
CLIFF BUDDLE  
       
Updated at 3.35pm: 

A senior judge has called on the Government to take urgent action
to stop ''irresponsible'' tobacco companies selling billions of
dollars worth of duty free cigarettes to smugglers.    

Mr Justice Wally Yeung Chun-kuen issued his call as he sentenced
former British-American Tobacco (HK) Ltd executive Jerry Lui
Kin-hong to three years and eight months in prison for plotting
to accept bribes of $23.25 million and a corrupt $10 million loan
from cigarette distributors.  Mr Justice Yeung said major
companies were putting their commercial interests before those
of society and assisting international criminals.  He said the
highly lucrative smuggling encouraged serious triad-related crime
and undermined efforts to persuade youngsters in Hong Kong not
to smoke by providing them with cheap black-market cigarettes. 
''The matter has not been stopped.  The authorities must take
urgent and necessary steps to close what can be described as
loopholes,'' he said.   ''Tobacco companies must be discouraged
and prohibited from taking an irresponsible attitude towards our
society, as revealed in the course of this trial, purely for
their commercial interests.''   

Lui's former employers BAT (HK) and Brown and Williamson Tobacco
Corporation had been invited by the judge to send legal
representatives to the hearing.    

Mr Justice Yeung said the companies had failed to explain
evidence that suggested they knew vast quantities of their
cigarettes were being sold to smugglers.   

''A leading international tobacco company sold large quantities
of duty-not-paid cigarettes, worth billions and billions of
dollars, with the knowledge those cigarettes would be smuggled
into China and other parts of the world.  

''It is also an open secret known to everyone in Hong Kong that
some of these cigarettes would find their way back to the local
black market,'' he said.  But despite his attacks on the
companies, the judge said his ''hands are tied'' by the law and
he would have to decide how much of the $23.25 million in bribes
pocketed by Lui should be returned to them.   

The companies' lawyers sent a letter to the court stating that
they did not wish to profit from the corrupt payments and would
donate any money awarded to them to charity.  The judge awarded
Brown and Williamson $6 million and BAT(HK) $4 million.  But he
also ordered that Lui pay the $11 million costs of the
prosecution, which included his extradition from the US. He said
this must take priority over the claims of the tobacco companies. 
Lui, former export director for BAT (HK), had been found guilty
at the Court of First Instance of plotting to accept advantages
between 1988 and 1993.  He received bribes to ensure one
particular distributor received large quantities of cigarettes. 

--------------------------------------------------------
                                        June 25, 1998
 Hong Kong Tobacco Exec Gets
 3-Year Jail Term For Bribery-

 Dow Jones Newswires

 HONG KONG (AP)--_ A former tobacco executive
 accused of taking millions of dollars in bribes was given
 a jail term of more than three years, Hong Kong's top
 graft-fighting body said Thursday.

 A high court judge sentenced Jerry Lui Kin-hong, 44, to
 three years and eight months in jail and fined him
 500,000 Hong Kong dollars (HK$), a statement from
 the Independent Commission Against Corruption said.

 The judge also ordered Lui to pay HK$011 million in
 prosecution costs and return HK$10 million to his
 former employers, the statement said.

 Lui was found guilty earlier this month of accepting
 HK$33 million in cash and unsecured loans between
 June 1988 and December 1993 when he was an
 executive at British-American Tobacco Co. (HK) Ltd.
 and its subsidiary Brown and Williamson Tobacco
 Corp.

 He conspired with executives of several local companies
 to supply them with cigarettes from British-American
 Tobacco free of government-imposed taxes, the court
 found.

--------------------------------------------------------
South China Morning Post
Friday June 26 1998, pg 20  
Editorial  
Smoking gun  

Tobacco companies like to portray themselves as having turned
over a new leaf. Shaken by the extent to which smoking is on the
decline in most of the world, coupled with a string of
embarrassing disclosures during litigation in the United States,
they seek to convey the impression of having grown more
responsible in their behaviour.     

Promises not to encourage young people to smoke abound as do
pledges of new funds for health education. But such Good
Samaritan behaviour is repeatedly undermined by instances such
as those which came out of the Court of First Instance yesterday. 
   

The culmination of the Jerry Lui Kin-hong case produced a fresh
demonstration of the way in which some firms still put their
narrow commercial interests ahead of any moral duty to the
public, just as they have in the past.     

It is no secret that Hong Kong is a major centre for cigarette
smuggling, given its proximity to the mainland which imposes
tariffs of up to 240 per cent on imported tobacco products.   
Any tobacco company which agrees to supply billions of dollars
worth of duty-not-paid cigarettes can have little doubt about the
true reasons behind any such request. Nor can it be under any
illusion that those cigarettes which are not smuggled across the
border will end up anywhere other than on Hong Kong's thriving
black market.     

As Mr Justice Wally Yeung Chun-kuen observed, that amounts to
assisting international criminals. Those remarks, made while
sentencing the former British American Tobacco (HK) Ltd
executive, were directed at his ex-employers. But evidence given
in other court cases suggests it is far from the only cigarette
company in such a position.     

That is unacceptable by any standards. If the tobacco companies
want the public to believe that they are now behaving better than
they have in the past, they must immediately apologise and sack
those of their staff who connived in such illegal activities.  

If they choose not to do so, that will only strengthen the case
for further legislation to curb such activities.

........................................................
Tobacco companies . . . must immediately apologise and sack those
of their staff who connived in such illegal activities  

--------------------------------------------------------
Tobacco firms 'aiding crime'  
South China Morning Post
Friday June 26 1998  
CLIFF BUDDLE and NIALL FRASER  

Irresponsible tobacco companies are helping international
criminals, a judge said yesterday. Mr Justice Wally Yeung
Chun-kuen said the firms were selling billions of dollars worth
of duty-free cigarettes to smugglers.    

They were putting commercial interests before society's and the
Government should act to stop them, he said.     

Mr Justice Yeung spoke as he jailed former British American
Tobacco (HK) Ltd executive, Jerry Lui Kin-hong, 42, for three
years and eight months. Lui was fined the maximum $500,000.   
He had plotted to accept bribes of $23.25 million and a corrupt
$10 million loan from cigarette distributors.     The judge said
smuggling encouraged triad-related crime and undermined efforts
to persuade youngsters not to smoke by providing them with cheap
black-market cigarettes.     

"The matter has not been stopped. The authorities must take
urgent and necessary steps to close what can be described as
loopholes, he said.     

"Tobacco companies must be discouraged and prohibited from taking
an irresponsible attitude towards our society, as revealed in the
course of this trial, purely for their commercial interests."  
  

Last night a spokesman for BAT in Hong Kong said: "British
American Tobacco does not smuggle, it does not condone smuggling
and its business is entirely lawful."     

The judge had to decide how much of $23.25 million in bribes
pocketed by Lui should be returned to the companies. Lui's former
employers, BAT (HK) and Brown and Williamson Tobacco Corpn, had
been invited by the judge to send legal representatives to the
hearing.     

Their lawyers wrote to the court saying they did not wish to
profit from the corrupt payments and would donate money awarded
to them to charity.     

He awarded Brown and Williamson $6 million and BAT (HK) $4
million.     

But the judge also ordered Lui to pay the $11 million costs of
the prosecution, which included his extradition from the United
States.     

Mr Justice Yeung had been alarmed by evidence which suggested the
companies knew about the smuggling. He said they had failed to
explain the evidence and singled out BAT (HK) for criticism.   
 

"A leading international tobacco company sold large quantities
of duty-not-paid cigarettes, worth billions and billions of
dollars, with the knowledge that those cigarettes would be
smuggled into China and other parts of the world."     

He added: "In my view the tobacco companies were clearly putting
their commercial interests above whatever moral duty they may
have towards our society and to some extent such irresponsible
behaviour amounted to assisting criminals in transnational
crime."     

Lui, former export director for BAT (HK), had been found guilty
at the Court of First Instance of plotting to accept advantages
between 1988 and 1993.                                        
                   
........................................................
Tobacco companies must be discouraged and prohibited from taking
an irresponsible attitude towards our society   

--------------------------------------------------------
ICAC on the trail of $1.6 billion in smuggling profits   
South China Morning Post
Friday June 26 1998, pg 3   
NIALL FRASER   

Anti-corruption agents say they have uncovered a global network
of bank accounts containing nearly $1.6 billion in cigarette
smuggling profits.    

The ICAC says the cash - which is still under investigation -
forms part of a massive international tobacco-smuggling money
trail.      

It is understood to be in accounts in Luxembourg, Jersey, Toronto
and Guernsey.    

''People perceive cigarette smuggling to be no big deal, but in
actual fact if you see the amount of money generated and the
parties involved you find that it is a very, very serious
international crime,'' said chief Independent Commission Against
Corruption investigator Ricky Yu Chun-cheong.      Former British
American Tobacco (BAT) executive Jerry Lui Kin-hong was convicted
last week of plotting to take $23.25 million in bribes and a $10
million loan to ensure distributors Giant Island received huge
quantities of duty-free cigarettes.      

He was sentenced to three years and eight months' jail yesterday. 
    

Figures show  that when Lui, 42, controlled the supply of
cigarettes to Hong Kong distributors, Giant Island received more
than half of BAT's sales.      

The discovery of the money follows the investigation into Lui,
but there is no suggestion it is linked either to him or Giant
Island.      

Sources said former Governor Chris Patten was ''extremely upset''
over a photograph of himself with Lui taken in the Philippines
in December 1995.      

Five days later, Lui was arrested in the US and within a month
Mr Patten had signed extradition papers for Lui's return to Hong
Kong.      
........................................................

People perceive cigarette smuggling to be no big deal, but . .
. it is a very, very serious international crime  

--------------------------------------------------------
Firms fan tobacco scam flames: judge
Hong Kong Standard,  pg 7
June 26, 1998
By Neil Western

AUTHORITIES must crack down on tobacco companies that ``turn a
blind eye'' to multibillion-dollar cigarette smuggling rackets,
a High Court judge said on Thursday.

Justice Wally Yeung said it was clear British American Tobacco
(HK) had for years put commercial interests above its moral duty
to society by supplying blackmarket traders.

``Tobacco companies must be discouraged from taking an
irresponsible attitude towards our society purely for their
financial interest,'' the judge said.

His comments came as former BAT (HK) executive Jerry Lui Kin-hong
was jailed for conspiring to receive $33 million in bribes to
ensure the sale and supply of cigarettes to Giant Island.

Lui, 42, was jailed for three years and eight months, ordered to
pay back $10 million of the bribe money to his former bosses and
landed with the prosecution's $11 million legal bill.

Lui has already spent a year in custody and will walk free within
two years. His assets are valued at $30 million.

Mr Justice Yeung said it appeared Lui ``was carrying out company
policy'' in supplying companies which were known smugglers.

``The evidence suggests that management of BAT (HK) was aware
duty not paid cigarettes . . . would ultimately be smuggled in
China and other countries.

``There could be no other explanation for this enormous quantity
of duty not paid cigarettes worth billions and billions of
dollars. Apparently the company turned a blind eye to the
problem.

``They took the attitude that as long as they did not directly
involve themselves in smuggling, what distributors did with the
cigarettes was none of their concern.

``In my view the tobacco companies were clearly putting their
commercial interests above whatever moral duty they have to our
society. To some extent such irresponsible behaviour amounted to
assisted criminals in trans-national crime.''

Mr Justice Yeung said it was ``an open secret'' that a quantity
of cigarettes would find its way back to the local blackmarket.

``It is not surprising that a lot of people, including triads,
are encouraged to participate in such trade. They are prepared
to commit offences such as bribery and some other more serious
crimes.''

``I am also concerned that at some stage the authorities in Hong
Kong may not be able to stop this illicit trade at its very
source. ''

Despite the criticism the judge said his hands were tied by law
over restitution, which had to be paid to his former employers.

He awarded $6 million to Brown and Williamson, a BAT subsidiary,
and $4 million to BAT (HK).

Lawyers representing both companies pledged to donate the cash
to charity as the firms did not ``wish to be seen to profit''
from bribe money.

Lui was found guilty by a jury of conspiring with four former
directors of Giant Island to accept advantages between August
1988 and May 1993.

In a faxed statement after the court case ended, BAT said: ``Only
governments can remove the incentives to smuggle by lowering
trade barriers and/or reducing taxation levels, both of which
encourage large scale smuggling of many consumer products.''
--------------------------------------------------------