BREAKING: SEC Investigating PMI and Inexto for Corruption in Argentina

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Diagram by Argentinian Authorities explaining conspiracy between Inexto and PMI

It has recently come to light that Phillip Morris International ( PMI) and Inexto are facing criminal investigation charges in Argentina. The tobacco conglomerate is under investigation for charges of corruption, collusion, bribery and conspiracy. In an article released the Spanish language magazine, the Tribuna de Periodistas, lawyer Jay Clayton has been cited as leading the investigation.

Clayton, for those who may be unfamiliar, is the head of the Securities and Exchange Commission. The SEC has been investigating PMI for some time on suspicion of illegal trade practices and falsifying records. The company’s are suspected of being falsified to show losses that have not been incurred in order to” manipulate the company’s control system [using] sophisticated methodologies and defraud its shareholders with fraudulent practices, and may even include money laundering.” The case is of interest to shareholders who purchase stocks of PMI publicly and would risk loosing a great deal of money if the company were to be served a lawsuit of the size hinted at.

Clayton received a letter from lawyer Alejandro Sánchez Kalbermatten informing him of the development in the PMI lawsuit. In the letter to Clayton Kalbermatten wrote, “It is necessary to reveal the macabre and repudiate practices of the dishonest leaders of the PMI company in the Argentine Republic, and possibly in the rest of the world where it interacts by itself or by subsidiaries, affiliates or controlling companies.” The judicial file Kalbermatten refers too is CFP 17766/2016, titled in court as “Costa Marcelo et al. unlawful association” Costa, the subsidiaries of PMI and Phillip Morris Products South America are all named in the suit. Interestingly, PoliticaJudicial.com sites the leadership of Inexto including Philippe Chatelain, Patrick Chanez and Erwan Fredat. as many of the accused. These three individuals are really the men behind Codentify, who originally developed the system for PMI and moved with the technology to Inexto when it was sold.

PMI is being accused of manipulation of the market under the guise of another independent party, Inexto. Inexto and their Codentify technology are supposedly monitoring the production and supply of tobacco and tobacco products in Argentina. However if in fact Codentify is being used as cover for Phillip Morris International then the reliability of their reports would be undeniably low.

The repercussions of this investigation can not be ignored. If PMI and Inexto are implementing practices like this in Argentina the threat of them transplanting their tactics to Europe is just a matter of time. The Codentify technology would not be trusthworthy and in fact meerly a puppet for PMI. The attack against PMI includes an attack on Argentinain offiicals who would have accepted bribes in order to allow these practices to continue undetected. “The big tobacco companies devised and planned a strategy to install this pseudo control system,” Kalbermatten claims in his letter to Clayton, “ in this particular case the Argentine Republic and the public officials of the AFIP and INTI, even appear to act encouraged by fees paid by the tobacco giant.”

Big Tobacco’s False Argument for Codentify and Inexto

It is about to time to take a step back from current events and look back on the argument made on behalf of the Tobacco industry as to why the EU should adopt Codentify and now Inexto as the track and trace tool of choice.

One of the primary argument in favor of Codentify, and now Inexto, is that the system is already at least partially in place across Europe and the adaption of any other solution would be cumbersome to the industry. The extension of this argument is that: as the system is already in place it will be more efficient for the EU itself.

The above mentioned argument should not be relevant and makes no mention of the draw backs of the system and of course the more important element that of course this very system was developed by the tobacco industry itself and is thus in inherent violation of the WHO’s FCTC protocol.

The goal of the EU’s tobacco track and trace initiative is to abide by the FCTC and of course actually fight illicit trade and insure that big tobacco is not cheating the EU out of tax payments.

The EU should not concern itself with the convenience of the tobacco industry especially because that convenience is at inherent odds with their goals.

Inexto: Big Tobacco’s Trojan Horse

Although they claim otherwise, big tobacco does gain from counterfeiting and smuggling cigarettes. It is not that all smuggling and counterfeiting is good for the industry, and they do fight, even aggressively at times. It is my belief that in other times they only vein a fight.

ASH recently published a fact sheet stating: “Despite the EU legal agreements, there is continuing evidence of possible tobacco industry involvement in illicit trade. For example, cigarette smuggling to and through Bulgaria continued after the deals reached with the European Union,23 and Japan Tobacco International (JTI) has been under investigation by the European Anti-Fraud Agency, OLAF, following evidence that its involvement in smuggling, with Russia and the Middle East as hubs, continued until at least 2010.24 In March 2014, it was reported that what was previously regarded as an “illicit white” brand, Classic, was in fact an Imperial tobacco brand produced in its Ukraine factory.

Luk Joosens put it best in a 2008 articleThe evidence strongly suggests that the key to controlling smuggling is controlling the supply chain, and that the supply chain is controlled to a great extent by the tobacco industry.

It is this context that has lead me to create a new video which tries to re-frame the story and evolution of Codentify and Inexto. Essentially business as usual is critical for the industry. More government oversight is not just burdensome for the industry but can hurt them in places where right now there is no invasive solution to insure compliance, which big tobacco also has experience in leveraging and exploiting.

Codentify and Inexto is the industry’s way to insure that things can continue to operate comfortable for themselves.

This video would not have been possible without insights from a tobacco industry insider who’s voice had to be distorted for obvious reasons. his additional narration explains three key points.

  1. the Codentify system has inherent flaws, specifically a fundamental inability to authenticate and distinguish a real or copied code.
  2. Codentify had to be sold to Inexto in order to distance the technology from big tobacco.
  3. the DCTA and big tobacco are still lobbying behind the scenes.

I hope in the coming weeks to obtain additional insights from him. When I do I will be sure to share them.

The WHO FCTC itself has explained that Inexto is too closely tied to the industry to be considered independent.

Please share my video and the EU know that Inexto is Codentify and Codentify is big tobacco.

Who Will Lead the WHO?

Upcoming Elections

In May 2017, the World Health Organization (WHO) will hold its General Assembly. Member states will select who the new director general is to be. The WHO plays a major indirect role on the ongoing EU Health Commission discussions on tracking and tracing tobacco products as they have created clear guidelines on tobacco product tracing outlined in the Framework Convention on Tobacco Control (FCTC).

Who are the WHO Candidates?

Dr. Sania Nisthar

Dr. Nisthar is the former Pakistani Health minister and runs her own NGO called Heartfile. Dr. Nisthar is also the co-chair of the WHO Commission on ending child obesity.

Dr Nisthar was know for her fights against big tobacco in Pakistan. Below I have listed some of her feats in this regard:

  1. Active member on the International Non-Governmental Coalition Against Tobacco
  2. Heartfile promoted the “ban-TAPS” Campaign in Pakistan and celebrated “world no tobacco day”
  3. published articles against the tobacco industry.
  4. Conducted research  into socioeconomic influence on tobacco use

Dr. David Nabarro

Dr Nabarro has spend much of his career at the WHO and UN. Dr. Nabarro served in a verity of roles relating to nutrition and food safety. He has also spoken out against big tobaccos attempts to influence the WHO. He has stated in the past that the WHO “needed better safeguards from industry interests.

Tedros Adhanom Ghebreyesus

The only non-MD contender is Tedros Adhanom Ghebreyesus. Dr. Tedros is a seasoned political actor who served in many prestigious and senior government roles in his native Ethiopia. He served as both foreign and health minister. Although not an MD, Dr Tedros is no doubt academically qualified for such a WHO role as he has a PhD on community health.

Dr Tedros’ relationship with big tobacco is a bit more complex that the other two candidates. I spoke to leading tobacco control activists in Africa expressed concern about Dr Tedros.

As foreign minister Dr Tedros seemed to facilitate BAT investment in Ethiopia which came in the form of a meeting with BAT officials while on a visit to The UK.

Additionally Dr. Frank Ashall an associate professor at an Ethiopian university  and now the director of Africa Tobacco-Free initiative has written articles apposing Dr Tedros’ candidacy.  Dr Ashall’s concerns revolve around  2016 Deal involving Dr Tedros that saw Japan Tobacco International purchase 40% ownership in the Ethiopian government owned National Tobacco Enterprise.

Dr Ashall explained in a comment o this blog that: “(Dr Tedros was) Foreign Minister at the time, and as a man who should care about expansion of tobacco and increased cigarette smoking in his own country, and as a man who is hoping to become WHO Director General, he should unquestionably have spoken out against this deal.”

I sent a series of questions to all three WHO candidates before writing this article. Unfortunately I did not receive responses from any of them.

Impact on EU Track ad Trace

The FCTC is of relevance in the greater context of my blogging as it explicitly states in article 8.12 that “Obligations assigned to a Party shall not be performed by or delegated to the tobacco industry.” This by extension extends to Inexto which was born out of the tobacco industry created technology called Codentify. Today Inexto’s core product remains the Codentify system and its senior staff are all those who created Codentify for big tobacco.

The WHO is the premiere body on which several EU member states have chosen to base their operating practices on. It is thus of critical importance that the WHO’s director general not just be divorced of tobacco industry ties but have a clearly demonstrable past of fighting the industry as a whole in the name of a healthier future.

We must insure that whoever becomes the WHO’s director general will proper carry out the FCTC and fight to exclude Inexto as a track and trace option in Europe.

INEXTO: Solidifying the Digital Rebranding of Codentify

Towards the end of January, Inexto, the new brand name for big tobacco’s track and trace system formerly called Codentify, has taken additional steps to rebrand which I will extrapolate on and analyze below. To be honest, they are pretty meager efforts which may reflect the fact that they know that it’s nearly impossible to hide their ties and history with big tobacco. So why spend the money trying?

Originally, I found their Facebook most interesting, but I have since updated this article to first give attention to their twitter.

A twitter account opened in Inexto’s name in January 2017 which until March 13th only had one follower. I am proudly their second. Their handle was @Inexto_Lausanne.

Amazingly enough, here is the first concrete tie between Inexto and Codentify.

Twice the account tweeted a link to a  wikipedia page titled “Codentify” which makes countless mentions of the birth of Codentify within big tobacco and its deep ties to the industry it is mean to regulate.

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Inexto actually tweeting about Codentify.

Here is a link to their tweet about Codentify in English.

And here is a link to a tweet about Codentify in French.

Whats more interesting is after I initially published this article on March 14th 2017, the Inexto account has changed its twitter handle. Their new handle is @InextoFr.

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New and old Inexto twitter handles.

Since revealing these facts they have blocked me from twitter.

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Inexto blocked me from twitter 😦

 

Moving on to their Facebook page, it appears that in early January a compay page was opened.

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The official Inexto Facebook page

as of early January the new Inexto Facebook page had only 4 likes.

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As of February 11th 2017 Inexto still only had 4 likes on

As of March 14th they have around 400. Once you look into who has liked their page it becomes apparent that almost no Europeans have liked the page. Interestingly, most of Inexto’s likes are from Middle Eastern Facebook users.

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A sampling of Inexto’s Facebook “fans.”

Only about 4 or 5 of their Facebook fans appear to be legitimately European, and all the others are mostly from Egypt.

According to a 2013 article on Adweek.com the average Facebook user likes between 40-70 pages. Most of the Inexto Facebook page fans have literally liked hundreds or thousands of other pages, further indicating the manufactured nature of their fan base.

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Many Inexto Facebook page followers have liked thousands of other pages.

Either Inexto is investing time in lobbying in Europe as a side gig and their real target audience is Egypt or they simply purchased likes on Facebook to strengthen the legitimacy of their brand.

Lastly, they have opened a new website called InextoNews.com. I suggest you look into that one yourselves and try and tell me what point it really serves.

All of this is in the context of the wider topic of big tobacco trying to distance themselves from the Codentify/Inexto products, despite tweeting about Codentify.

I have extensively covered the sale of Codentify and the formation of a new company called Inexto with no superficial ties to big tobacco. I have made mention in the past that this is an intentional strategy to rebrand Codentify as an independent product so it can be considered as a viable track and trace solution for tobacco products in the EU. In reality it is not.

Towards the end of 2016 Inexto stopped utilizing the term Codentify all together.

It is interesting to note that as of the end of January 2017, Inexto ceased to sell Codentify as a brand and has instead broken the technology up into four components using Inexto branding. I have mentioned in a past blog post that their website makes no mention of their history as a tool for the tobacco industry.

Last time I covered the story of their rebranding, I mentioned a sales presentation on Inexto that was posted online. Shortly after my article published it was removed.

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Inexto sales slideshow removed from the web.

It is important to note that these accounts are not linked to by the Inexto website but based on most of their content are likely official.

I am curious what changes will be made after the publication of this article.

Questions of Transparency in EU Heath Commission’s Tobacco Track and Trace Consultation

I have written twice now on the questionable hiring of PwC and Everis by the EU Health Commission to consult on adopting a track and trace solution for tobacco products in the EU.

After publishing my first article on the matter, which brought to light obvious ties between PwC and the tobacco industry, I began to work on a follow up. During the process of writing my follow up piece I turned to the commission itself for comment but received no answer in reply.

It was only after I brought the matter to the EU Ombudsman office that the commission took the time to respond to my inquiry.

Since publishing my first article I know of at least 3 European parliament members who wrote of their concerns to the commission as well.

Myself along with these members of parliament received rather vague responses from the commission.

Much has happened since these two articles where published. In December there was a stakeholders meeting and since then Everis has been tasked with conducting continued consultation work.

It is in light of the continued developments on the matter that I wrote to commission personnel as well as a spokesperson with a series of specific questions regarding the progress that Everis is taking.

Again, it took the commission over a week to respond my questions and they only did so after the intervention of the EU Ombudsman office and my bringing this to the attention of the tobacco control movement.

Below is the unedited question and answer discourse between myself and a commission spokesperson:

1) can You provide an update on the direction that the consultation is taking, specifically which of the three types of solutions is being considered: industry based, external or mixed solutions?

If your question refers to the policy options related to the model for marking products with unique identifiers, we are currently analysing and evaluating all the possible options and at the current stage no final decision has been taken.

2) What type of contact is taking place between PwC, Everis as well as the commission itself with the tobacco industry during this consultation process? Are any of the the above metioned bodies in touch with the tobacco industry between stakeholder workshops?

We wish to underline that the involvement of stakeholders and general public in this implementing process has been conducted in line with the rules on the Better Regulation and FCTC Article 5.3 . In this regard please note in particular that:

Following the Feasibility study (published in March 2015 http://ec.europa.eu/health//sites/health/files/tobacco/docs/2015_tpd_tracking_tracing_frep_en.pdf ) a targeted stakeholders consultations was conducted. The results of such consultation are published here https://ec.europa.eu/health/tobacco/consultations/2015_tpd_consultation_en

A second consultation, addressed to all stakeholders and the general public, was launched following the publication of the Inception Impact Assessment, https://ec.europa.eu/health/tobacco/consultations/2016_traceability_security_features_en

As prescribed by the Better Regulation rules, a stakeholder workshop was held in December 2016. A summary record of the meeting has been published here https://ec.europa.eu/health/tobacco/consultations/2016_stakeholderworkshop_tpd_en

The opinions received in the context of these consultations have been analysed and taken into account appropriately by the external contractor, Everis.

3) Does the commission or its consultants qualify Inexto as an independent, mixed or tobacco industry solution?

Please note that the role of the Commission in its implementation work is not to select any individual set of proprietary technologies, but rather to determine the technical standards for the establishment and the operation of the tracking and tracing system, as provided by Article 15(11) of Directive 2014/40/EU.

4) How do you plan on keeping the public up to date on this issue in between stakeholder workshops?

In addition to the requirements prescribed under the Better Regulation framework, summary records of meetings of the Subgroup on traceability and security features, as well as all other meetings with Member States, are published on DG SANTE official website.
Finally please note that in addition to the consultation of experts in the Member States the draft texts of delegated and implementing acts will be made public for 4 weeks on the Europa Website, allowing stakeholder feedbacks.

5) Can you please elaborate on what the exact roles of PwC and Everis are in the consultation process? We saw Everis heavily featured at the last stakeholders workshop but did not see any real presence of PwC. What is PwC’s role exactly?

The actual work is carried out by Everis. None of the members of the contractor’s team is currently working for PwC.

6) what will the consultation process look like from here through may (the next stakeholders workshop)?

In the context of the present implementation process the consultation with stakeholders and general public follows the rules prescribed by the Better Regulation. Please note that the consultation strategy related to the secondary legislation under Articles 15 and 16 of Directive 2014/40/EU was published in July 2016 (https://ec.europa.eu/health/sites/health/files/tobacco/docs/2016_consultation_strategy_en.pdf ).

7) who specifically are you in touch with from the tobacco industry?

Please see reply to question n. 2.

8) Who are you specifically in touch with from Inexto?

Please see reply to question n. 2.

This, of course, only raises more concerns about the level of transparency and practices taking place regarding the track and trace solution much needed in the EU.

All of this is taking place in the shadow of the sale of a tobacco industry produced solution called Codentify, that the industry sold off to a third party that still contains questionable ties to big tobacco. The system has since been renamed and re-branded as Inexto. This is also a topic I have covered extensively.

I have even gone so far as to produce a video about the ongoing ties between big tobacco and Inexto.

The delayed response from the EU Health Commission only raises concerns that I mentioned in the above video.

I hope with the publication and sharing of this post additional responsible actors in Europe will seek clarity on this matter from the commission.

If anyone wants to write to them on this important issue please do so.

You can reach their spokesperson at: Enrico.BRIVIO@ec.europa.eu

Inexto and Codentify: Connecting the Dots.

As my readers know by now, Codentify is the tracking and tracing system proposed by the tobacco industry as the solution for governments to meet their obligations under Article 8 of the Protocol to Eliminate Illicit Trade in Tobacco Products when it will enter into force.

The Codentify system was developed and patented, and the trademark registered, by Philip Morris International in 2006. To promote the system as an “industry standard,” the four major tobacco multinationals, PMI, BAT, JTI and Imperial Tobacco Group (ITG) created in 2011 the Digital Coding and Tracking Association (DCTA), based in Zurich, Switzerland.

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2006 Codentify Patent

Codentify has been criticized for the inadequacy of its technology with the requirements of the IT Protocol. Furthermore, the role of the tobacco industry in controlling and promoting this system raises serious concern, notably because the past and current record of the tobacco companies’ involvement in illicit trade of tobacco products, and with respect to Article 5.3 of the FCTC which requires that the tobacco industry be kept at arm’s length of governmental decisions. In their 2013 paper, Joossens and Gilmore indicated that the tobacco industry had devised a strategy to circumvent this concern by licensing the Codentify technology “to ‘credible’ third party providers who would in turn promote Codentify on their behalf.”

Last June the system was sold off to a so called “third party. The DCTA announced in a press release that its four members had signed and completed an agreement “by which Inexto, an affiliate of the French Group Impala, has acquired the DCTA’s track & trace and product authentication technology,” adding that “a specialized and independent technology company is now best placed to further develop this technology.”

I initially helped break the story in June of 2016 in an EU Observer article on the subject of the sale.

Since then I also indicated based on my sources that the Codentify product will be broken up and re-branded which is since evident in this latest Inexto/Codentify brochure which today makes no mention of Codentify or their tobacco industry past. The above mentioned brochure has since been removed from the web.

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Inexto’s 4 technological offerings based on Codentify, since removed from the web.

Since the publishing of this article the above mentioned presentation has been removed. Today the link appears below with a 404 error.

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Inexto products slideshow removed from the internet after the publication of this blog.

How independent is this new company? Its statutes are completely anonymous and offer no clue to answer this question. They simply indicate that the company maintains a list of owners which can be “accessed at any time in Switzerland.”

What we do know is a number of their key leadership roles are filled by the creators of Codentify back in PMI. This is a topic I have covered heavily in the past.

Inexto’s head office is located at avenue Edouard-Dapples 7 in Lausanne, not far from PMI’s headquarters. Interestingly, this address does not correspond to an office building but to a residential apartment building, with about 15 occupants.

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Inexto offices at avanue Edouard-Dapples 7 in Lausanne

After some web-searching of all building resident, none of the tenants had the profile to host the new company, except perhaps one…

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Inexto doorbell in same building as a tobacco industry executive.

Sylviane Marguerat Jendly, who is … Manager Procurement Switzerland at PMI.

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Marguerat’s linkedin CV title.

Below is her address listing publicly available on the internet.

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Proof of Marguerat’s address publicly accessible online.

Perhaps Marguerat, was the one to suggest to Inexto a convenient and discrete office space just blocks from PMI’s offices.

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Inexto’s office is just a 5 minute drive from PMI’s.

These bits of information about the company, together with the opacity otherwise surrounding its creation, suggests that Inexto may have links with PMI. Consequently, regulators and policy decision makers who might have to deal with Inexto should be careful before assuming that the company is independent from the tobacco industry. They should request that solid and trustworthy evidence of its independence be provided by the new company. In particular, they should request Inexto to produce the list of its shareholders and copies of all its contractual agreements with DCTA and its member companies, notably Philip Morris, including full information about the conditions under which intellectual property rights for Codentify were transferred to the new company.