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Archive a Smoking Gun for Tobacco Firm

Why British American released papers showing possible links to contraband sales remains a mystery.

November 23, 2003|Myron Levin | Times Staff Writer

GUILDFORD, England — This handsome town south of London is steeped in history. An 11th-century castle built by William the Conqueror overlooks the village center from a lovely hilltop park. The Rev. Charles Lutwidge Dodgson, better known as Lewis Carroll, is buried here.

On the outskirts is a no-frills two-story building packed with history of another sort. Known as the Guildford depository, it is a house of secrets, or former secrets, of the world's second-largest tobacco company, British American Tobacco.

British American created the archive to hold millions of pages of documents produced for the anti- tobacco suit filed by the state of Minnesota in 1994. Most of the records involve health and marketing issues that were the crux of the lawsuit.

But embedded in the mountains of paper are fistfuls of memos on British American's links to cigarette smuggling -- documents that weren't pertinent to the lawsuit and that the company never was asked to produce. It turned them over anyway, for reasons that remain a mystery.

The smuggling papers chronicle British American's swashbuckling march through the developing world and the role of contraband sales in its global expansion. Among the papers are memos from high-ranking executives discussing the importance of illicit sales in maintaining or building market share against like-minded competitors in such locales as Lebanon, Argentina and China.

Their disclosure rocked the industry, fueling charges that global tobacco firms had encouraged smuggling to crack closed markets at a cost to governments of a fortune in lost taxes. The documents lent powerful momentum to a barrage of lawsuits and investigations, including a long-running probe of British American by Britain's Department of Trade and Industry.

"It's almost an unfathomable mistake on their part, which starts me asking whether it was a mistake," said Eric LeGresley, a Canadian lawyer who has mined the Guildford archive for ammunition for various clients, including the European Union. "I just find it difficult to believe that they could have been so dumb."

Current and former British American executives declined requests for interviews for this story and did not respond to written questions. In a prepared statement, the company said it had produced for the Minnesota case all the files that might contain relevant material -- without reviewing the contents of each file. As a result, the company said, "some files contained nonrelevant as well as relevant documents."

Tobacco companies have denied that they ever encouraged smuggling, blaming it on high cigarette taxes and porous border controls. But critics say the Guildford memos show that British American worked through intermediaries to direct contraband shipments to specific markets -- and assumed its rivals were doing the same.

Jon Ferguson, a former deputy attorney general for Washington state, said that when he first saw the memos on a visit to Guildford, he wondered: "What the hell were those doing here? I couldn't figure out why they had produced those documents."

They certainly weren't germane to the cases being litigated when British American coughed them up.

Minnesota was among the first of dozens of states that sued the company, its U.S. unit Brown & Williamson Tobacco Corp. and its rivals -- including Philip Morris Cos. and R.J. Reynolds Tobacco Co. The suit accused them of saddling the state with extra medical costs by concealing information and enticing smokers with fraudulent marketing claims. The state sought internal documents from the 1950s to the 1990s showing what the companies knew when they were downplaying the risks.

British American produced about 6.5 million pages. Rather than haul them to the U.S., the company set up the depository to accommodate visiting plaintiffs' lawyers. Minnesota's case was settled in 1998, and as part of the agreement the company promised to keep the archive open and available, by appointment, to members of the public. Academics, activists and lawyers have been coming ever since.

Defendants in high-stakes litigation typically fight tooth and nail to avoid producing damaging documents. The tobacco industry in particular is known for its hardball resistance to discovery requests. Indeed, for the first 35 years of tobacco litigation, cigarette makers never once produced a significant number of damaging documents. That makes the British American disclosures seem all the more baffling.

"I'm not aware of a case where a company has divulged information which was so damaging where they weren't under some legal compunction to do so," said Stephen McG. Bundy, a law professor at the University of California at Berkeley.

Tobacco foes have suggested that British American was so steeped in the dodgy routines of the global trade that it did not realize the papers would cause a sensation. Others have speculated that a page-by-page review could have added millions of dollars in legal costs, though the firm did not cite this as a factor.

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