Connections between DG SANTE, PWC and PMI.

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On June 22nd the EU Commission Tobacco working-group’s  Subcommittee on Tracibility and Security Features convened a meeting in which DG SANTE informed the committee that they have subcontracted consulting work to two firms to conduct both a feasibility and implementation study of potential track and trace solutions to be implemented across the EU. The question is: are these third party firms truly independent of tobacco industry influence.

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Screenshot from DC SANTE document citing PWC and Everis as consultants on tractability solutions.

The Tobacco industry has produced and promoted a system called Codentify which they have begun implementing across Europe in an attempt to create an unavoidable reality in which their system must be chosen by default. In actuality this system may not even track or trace products and as the health conscious community raised concerns about the systems capabilities the tobacco industry sold the system off to a, so called, “Third Party” company named Inexto in an attempt to distance the product from themselves. This story I proudly broke to the EU observer some months ago.

The World Health Organization’s (WHO) Framework Convention on Tobacco Control (FCTC) has explicitly stated that Codentify does not meet their standard for a solid track and trace solution for the industry.

The two company’s assigned the consulting task by DG SANTE  are PWC and Everis. The hiring of such firms came as some surprise to those watching this committee closely and when the firms names where announced it was important to explore if these firms have an intrinsic interest in supporting a tobacco industry produced solution.

After just an initial search it is clear that PWC has strong ties to the tobacco industry which put their objectivity in inherent question. PWC are the primary auditors for Philip Moris International (PMI) and have in the past done auditing work for British American Tobacco (BAT) as well.

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Proof from PMI’s website of an existing relationship with PWC.

Although this is just preliminary information I will continue to delve deeper into this issue and publish as more information comes to light.

 

Initially  DG SANTE refused to respond to requests for clarity on these matters but in recent days have responded. I will be including their full response in a follow up article.

The Context for Why we Can’t Accept Codentify.

The illicit tobacco market is still thriving. The counterfeit tobacco industry avoids any type of health regulation as well as circumventing any imaginable tax along the way – costing respective governments unseemly sums, and the lives of citizens along the way. In the interim, the EU commission on tobacco attempts to find a viable method for tracking the sale and smuggling of counterfeit tobacco products. Inexto’s Codentify is one of the solutions proposed. The following points lay out – in as profound and irrefutable terms as possible – why investing in Inexto would be a destructive and irresponsible course of action for the EU in tackling the issue of illicit tobacco smuggling.

 
At its core, working with Inexto is akin to working with the tobacco industry itself. Inexto is essentially an offshoot of Codentify, a system developed by PMI itself. On paper, Inexto is distinct from Codentify. However Inexto has been found to be linked to the tobacco industry as well, albeit in a subtler fashion. Not only is this a blatant conflict of interest, but a contradictory path to solving the issue of tobacco smuggling. The regulatory solution must not only be independent on paper but truly free of the industry’s influence.

 

A look at Codentify reveals more than ten years of development by the same people who were meant to be monitored. Selling the product to Inexto and moving with it not just the technology but all of the tobacco men behind the product won’t erase that contradiction.
Codentify was initially developed to meet the internal tobacco industry needs unrelated to regulation. The system was developed to actually assist the big 4 in hiding information from each other. This was done by producing a code that provided limited useful information. This is in fact the core technological element of Codentify. Later it was adapted into the so called “track and trace” solution meant to satisfy the EU’s desire for transparency. Inexto now offers the same technology that was developed by PMI under the DCTA. In that case, it would be reckless to consider Inexto considering the technology was produced by the same institution the EU is attempting to regulate. In fact any proven independent solution should be immediately considered before Big Tobacco’s proprietary technology, even if the holder of that technology is a third party. Ultimately, what matters is the method used to regulate and stop illicit tobacco.

 
Inexto’s Codentify does not just lack basic tracking and tracing capabilities but was built with no intent on attempting to fulfill such a role.

 
It is crucial as well that any opportunity to prevent a compromised regulatory solution is employed. The eventual solution must protect respective governments and their citizenry from any potential of fraud, collusion or sabotage by tobacco insiders. In its current form, Data from Inexto’s Codentify is vulnerable to be tampered with or exploited by numerous inside players who can be divided up into three level.

 
1) Big Tobacco executives – use of data against smaller competitors or influence governmental authorities.
2) Local manufacturers- potentially without company knowledge manipulate production stats or divert products to illicit paths
3) Individual employees- IT staff can commit fraud on an individual level.
This must be prevented at all costs, and using Inexto would certainly add to that risk. I have previously spoken with whistleblowers who described low security standards surrounding Codentify in the factories.

 
The consequences of such a vulnerability are important to note. Such a system would be strategically problematic in that any tobacco company with access to Inexto and its procedures can easily decide to exploit the system in order to avoid taxes and/or regulation. This can be done through the means of overproduction, for example, and this goes the same for any manufacturer as well as any tobacco worker.

 
Therefore, the ideal system would be under the complete auspices of the government in that all regulatory and taxation policy and measures would be in the domain of both the EU and its member states, as opposed to any third party like Inexto and its parent developers. These government bodies should maintain the legal means to audit and check the production volume of any tobacco-related manufacturer, freighter or distributor without previous notice. Such a system would ensure that the law was being followed.

 
The same goes for how tax policy on tobacco is instituted. As taxation policy changes, many countries rely on earmarked tobacco taxes for crucial things such as health education budgets Big Tobacco insiders who attempt to influence tax policy in their favor are doing so exclusively for their own market interest and constitute a direct harm to each country’s well-being. . Similarly, tobacco representatives should be restricted access not just to the halls of influence but to government findings as well. For example, Big Tobacco should not be privy to a government-sponsored study drawing links between tobacco tax policy and tobacco consumption, lest they use the conclusions to their own benefit.

 

Additionally the governments should be able to investigate and audit independently of the industry.

 
If the EU were to institute Inexto, many tobacco industry employees would have precise knowledge of the system’s vulnerability and loopholes and would exploit the system accordingly. Such a security breach cannot be undone without reverted to a completely new system of regulation.

 
Lastly, beyond the strategic concerns associated Inexto lies evidence that reveals the character of Big Tobacco as an industry. We can’t forget the plethora of examples and cases showing the tobacco industry’s blatant misuse of power and influence over government authorities whenever it was given the opportunity. There has been evidence of tobacco companies using law enforcement agencies to harass and spy on competitors. Moreover, there are countless examples of Big Tobacco lobbying to promote tobacco policies that directly benefit their own industry, regardless of its effect on the public.

 

Therefore, employing Inexto would ultimately be one more overarching case of influence by Big Tobacco over the European Union.

South African Tobacco Mercenaries

Flag_of_South_Africa.svg.pngIn the beginning of the year I covered the story of a whistleblower named Paul Hopkins, a former member of the Irish special operations unit who had worked for British American Tobacco (BAT) in Africa for over 13 years. Hopkins revealed to the BBC that as a part of his operations in the continent, he regularly bribed law enforcement officials and harassed local rival tobacco manufacturers.
Specifically, he shared emails exposing illegal payments he made to two members and one former member of the World Health Organization’s Framework Convention on Tobacco Control (WHO-FCTC), to undermine their efforts against the damages caused to the public health by the tobacco industry. Details of his operations, as described by the BBC and the Independent newspaper were disturbing, given the likelihood that this is only the tip of the iceberg of BAT’s schemes in Africa.
So you shouldn’t be shocked by the fact that in the past month or so, a new major scandal relating to BAT has surfaced, this time, in South Africa. Under the infamous motto of “tackling illicit trade”, BAT was using the services of a local private security firm called Forensic Services Security (FSS) to promote its interests in the region (i.e. mostly spy on their local competitors). The firm is run by former apartheid era spook named Stephen Botha, and according to recent leaks and testimonies from its ex-employees – FSS’ work for BAT is could be described as somewhere between Godfather and James Bond.
Since the beginning of August, a Twitter account named “SATobacco Espionage” started publishing masses of FSS’ leaked materials related to their work for BAT. This was made in parallel with a signed affidavit made by FSS’ former-employee and recent whistleblower, Francois van Der Westhuizen (most likely to ensure his protection). Just to highlight some of the more “juicy” parts:
• Bribery of law enforcement officials including SA’s revenue services and police.
• Using local police’s CCTV capabilities to spy on BAT’s local competitors.
• Arranging regular inspections in the competitors’ premises by local authorities to obtain their confidential information.
• Placing tracking devices on the competitors’ trucks.

For a further read, you should check the Daily Maverick’s piece interestingly, Twitter shut down the   handle that leaked the material. The account has since been re-opend at the as SATobacco Espionage

 

How many more scandals and leaks are needed to understand a very simple truth?
Any connection between law enforcement and regulatory agencies and Big Tobacco lead to only one thing, the misuse of government’s regulations and power to promote the business interests of the tobacco oligopoly.
Big Tobacco will tackle illicit tobacco trade!
Actually, they will tackle any tobacco trade as long as it is competing with them.
Big Tobacco will work closely regulatory authorities!
They will even have an entire CCTV room at the local police department working for them.
Big Tobacco will track & trace!
If it means putting tracking devices on their competitors’ trucks and tracing whistleblowers.

 

Jokes aside, these examples in Africa are a great opportunity to see this cycle of lies in its true, corrupted and ugly form:

 

It’s not that they don’t do it in Europe – it is just masked and re-branded in the subtle form of “Codentify” now transferred to Inexto from within the tobacco industry itself. The next whistleblower is going to be from the EU authorities that even considered working with, or more accurately, for, these companies.

Tobacco Smuggling in Africa

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As the anti-tobacco world turns its gaze to the mass smuggling in Africa, we need to be looking at Europe’s policy on Codentify, which could make worldwide smuggling even worse.

For years now, people have been taking notice of the sickening levels of tobacco smuggling around the world. As research as shown, not only does it contribute to failings in public health, whereby regulatory bodies can’t properly identify the ingredients of smuggled tobacco, but also it has been linked to various terrorist groups who use their profits from counterfeit tobacco to commit violent atrocities across the world.

 
According to the Times of Malta, worldwide tobacco smuggling is up 28% this year.

 
But nowhere is tobacco smuggling more rampant than in Africa. Just last week, Front Page Magazine did an expose about how tobacco smuggling supports worldwide terrorism, and they put a particular spotlight on the illegal trade in Africa. They brought up our old friend Mokhtar Belmokhtar (aka “Mr. Marlboro”) as a prime example of how profits from the African counterfeit tobacco trade is funneled into terrorist organizations like Al-Mourabitoun.

 
All over the continent, authorities are catching people trying to smuggle cigarettes. Like this story from last week about two Zimbabwean truck drivers smuggling a cargo of illicit cigarettes valued at N$11.3 million (US $800,000) through Namibia.

 

According to Joseph Megero, Director of Africa Tobacco-Free Initiative an initiative that seeks to advance development and advocacy for tobacco control measures regionally: “Tobacco companies tend to raise the counterfeit issue with governments in Africa whenever the governments want to raise taxes on tobacco  products. This is done to ensure the poor smoker is still able to sustain his addiction to tobacco by affording to buy cigarettes.”
Many more stories like these come in daily. Some with more, some with less. But, considering the rampant corruption in Africa, this is only the tip of the iceberg, since these stories are those where the authorities do their jobs without taking bribes.
Unfortunately, the problem will only get worse before it gets better. As corruption in Africa deepens, and terrorist organizations and their adherents get more desperate, smuggling tobacco will be their ultimate cash cow.
Meanwhile, the EU (The recipients of much of this tobacco) is still trying to get their act together to prevent an influx of illegal tobacco, which could trigger a continental health crisis as well as billions of euros lost from unreported taxes.
Now, you would think that the first people that would want to put a stop to this are the tobacco companies themselves, Big Tobacco. After all, if someone is smuggling their products it must mean that they are stealing it right? It must mean that the smugglers are taking profits away from Big Tobacco.
You would be wrong. In fact, smuggling has a positive effect on industry executives. For one, the industry avoids millions of Euros in taxes since their product is traded out of the sight of authorities. That also means cheaper production costs per cigarette overall and a higher markup. And lastly, if consumers are paying less for cigarettes, it means there are more likely customers – especially those with less disposable income. Namely, the young and poor. Counterfeit cigarettes are a great way for Big Tobacco to get young kids addicted early – giving the industry a handful of long term customers.
But while policymakers around the world scramble to find a legitimate technology that would properly track-and-trace sales of tobacco, why would Big Tobacco want to get involved if it is benefiting from smuggled tobacco?
Because if you can manipulate the technology, you can manipulate the entire system. You could essentially oversee your own counterfeit empire.
Which is why it would be in their own interest to work with the EU to develop a signature technology as the choice fight against tobacco smuggling.
And that’s exactly what’s happened with Codentify. Developed and lobbied by Big Tobacco in order to be the puppeteers of a vast network of tobacco smuggling cells across the world, and particularly in Africa, where smuggling is currently off the charts. But it’s possible that Codentify’s imminent implementation into EU policy has revved up efforts to trade illicit cigarettes across the Mediterranean and in and out of Europe, where cigarette taxes are heavy.

 

That is why it’s imperative that Codentify not be allowed to be implemented. If it is chosen as the EU’s official technology, time will tell its effect. Smuggling – already at crippling levels – will skyrocket to unfathomable heights.
And meanwhile, Big Tobacco will be rolling in the riches; chuckling at how easily they duped the European Commission to take the system that they engineered for the very purpose of filling their own pockets.
So as the murmurs of Codentify’s instatement continue to fill the halls of the European Parliament, and as its members deliberate the pros and cons of the technology while Big Tobacco lobbyists indoctrinate and inflict their agenda – those with common sense must stand up and warn the people – and the politicians – what they are bringing upon themselves.
Whether it’s Codentify, Inexto or whatever the next front company Big Tobacco uses to market their useless and self-serving technology, it cannot be allowed to pass.

Could the EU breaking from PMI Be a Sign of Things to Come?

The European Union has decided to end its longtime partnership with Philip Morris International. The controversial $1.255 billion partnership was initially set up in order to combat the issue of tobacco smuggling in the free-flowing continent. Many perceived this partnership to be unnecessary legitimization of a corrupt industry by the EU.

 

Now, finally, the EU has decided to wise up to this colossal mistake in judgment.

 

The Financial Times consulted tobacco control expert Luk Joossens, who has been lobbying against the EU working with tobacco companies for years. He said that, “There is always suspicion from other countries because the EU collaborates with the industries.”

 

He is right, and hopefully this move is a sign of things to come. The EU should know that collaborating with tobacco companies to “fight” issues within their industry is profoundly counterproductive. And such counter measures end up costing the European taxpayers billions at their own expense.

 

I expect and hope that the EU will continue to down the path they have started and reject working with companies- especially tobacco companies- to regulate their own industry. Among the EU’s first prerogatives should be to avoid any conflict of interest.

 

That goes well for Codentify. As we know, Codentify is a deeply flawed system that was actually developed by the tobacco companies themselves. Not only is their involvement an issue, but the technology itself is dramatically subpar, and will do nothing to prevent more smuggling. If anything, it might just increase it (and the companies will benefit).

 

Cigarette smuggling has been a major issue in Europe for some time. Not only is there a major circumvention of tax revenue through illegal sales, but the lack of monitoring can prove harmful for the average smoker, since no government officially oversaw the ingredients in the cigarette.

The EU has long been considering Codentify as their new mandated track-and-trace system for smuggling. Many tried to counter the controversy by pointing to its recent sale to Enexto, which some claim to be a legitimate third party.

 

 

But, alas, this is only a front to keep the power in the hands of the tobacco industry.

 

 

At any rate, it’s incumbent on the EU to reject Codentify outright and find a more suitable-and neutral-track and trace system to regulate tobacco smuggling. And these new signs of the EU backing off from Big Tobacco are a sight for sore eyes.

 

 

Let’s hope the EU pushes the envelope, and rejects capitulation to Big Tobacco. With that, European citizens can be secure in the fight against illicit cigarette sales.

 

Sale of Codentify to Inexto Means Business as Usual for Big Tobacco

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Today, Peter Teffer from the EU Observer published a hard hitting article about the DCTA’s sale of Codentify to what at first glance seems like a third party company. I felt it important to provide as much detail as possible to shed even more light on the important issues he raised.

 

Just a small reminder before we proceed – DCTA stands for “Digital Coding & Tracking Association”, which is a very “techy” brand-name for an association consisting of the Big Tobacco companies (I guess Deception Campaign for Tobacco Affiliates would sound a bit too sincere…).
It seems that the industry’s efforts to portray Codentify as a legitimate “Digital Coding and Tracing” solution have finally crumbled, because at the beginning of the June DCTA’s official web page released a statement that all of its technology was allegedly transferred to an independent third party company named “Inexto”. If that was entirely true, it would be good news for the advocates of an independent Track & Trace solution, such as the FCTC protocol and this blog – but unfortunately in this case, it is only an additional layer of deceit.
The press release states that Inexto, an affiliate of the French group Impala, has acquired the DCTA’s Track & Trace and product authentication technology (i.e. Codentify). It must raise a question – who is really behind this Inexto company that decided to buy a controversial product such as this?
Meet Inexto’s managing director, Philippe Chatelain. You might know him from his former role as PMI’s Director Product Tracking Intelligence & Security in the past 14 years (as a matter of fact, his LinkedIn page states he still holds this position):

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Moreover, according to Codentify’s European patent registration (EP1719070) he is also the inventor of Codentify(!), along with Erwan Fradet:

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Erwan Fradet was a senior engineer in PMI’s tracking and security activities over the past 10+ years, in fact, since 2010 he was Codentify’s project manager. But where does he work these days? He is Inexto’s new Chief Technology Officer!

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And the list goes on… Inexto’s Chief Operating Officer, Patrick Chanez, is also a senior PMI manager:

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And so is Inexto’s Development Manager, Nicolas Stubi:

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The question that remains unanswered is: What type of severance and pension plans did these employees receive from PMI?

 

By now the bottom line is clear: Inexto did not acquire Codentify – Inexto IS Codentify.
Same people, same interests. In fact, these are high ranking PMI managers, who were (and still are) in the core of Codentify operations. A name change and a couple of money transfers from one corporation to another does not change this reality, and simply cannot be enough to satisfy the rightful demands of the FCTC protocol for a truly impartial solution, not one that has a decade’s worth of ties to the tobacco industry.

Monumental decision by the EUs High Court Leaves out Codentify

It was day for anti-tobacco activists in Europe as its High Court confirms anti-tobacco laws, but this modest win still does not address Codentify, which could prove most harmful to citizens.

Recently the New York Times’s columnist David Jolly reported on the recent upholding of new anti-tobacco laws that will take effect at the end of May. The laws included in the EU High Court decision were the legal right of the legislative coalition to restrict and regulate the newly established e-cigarette industry, a ban on menthols, as well as obliging all cigarette packs to contain an image of diseased lungs, also known as “Plain Packaging”.

Despite this monumental confirmation of anti-tobacco laws, the article reports that twenty-eight countries in the EU aren’t necessarily bound by all of the laws’ stipulations, and can essentially customize the laws to their specific needs. Therefore, the binding nature, and the net positive effect henceforth, of this new set of laws can be put into serious doubt.

Luckily, however, the article notes that even with the addendum of flexibility, the general ruling cannot be appealed by the tobacco industry, which can be considered a win in its own right. Nevertheless, the EU should prepare for an assault by Big Tobacco to reverse these common-sense laws that have only now been cleared by the High Court. According to most experts, the tobacco lobby will most likely consolidate its fight against plain packaging.

The law was originally passed in 2014, and yet these stipulations are only going to be put into effect this month. That’s because, according to the article, certain countries appealed the legality of the 2014 laws because their populations and economies could “suffer” as a result, particularly Poland, Romania and England. Their courts begged whether the law should be indiscriminately extended across of all member states.

Take Poland: according to the New York Times, “Poland…has one of the world’s highest rates of menthol cigarette consumption,” which certainly clears the air as to where Poland (and its ally in this instance, Romania) stands in the fight against tobacco, and why they pioneered the appeal of these laws, particularly the part banning menthols.

That’s why this case has taken particularly long, and had to be ratified by the Court of Justice in Luxembourg, which essentially serves as the EU’s main appeals court to member states. Ultimately, however, the Court of Justice ruled that the law was legal and should be “applied evenly across the bloc”.

Additionally, the regulation of e-cigarettes is a big step forward in the fight against Big Tobacco in Europe. Yet the article mentions no detailed analysis of these restrictions, and happen to note that the restrictions will certainly be weaker than that of traditional cigarettes.

The article notes that while the United States lacks federal laws against e-cigarettes, many individual states have taken it upon themselves to limit their use in public. In this regard, Europe has lots of catching up to do if it aims to sustain its reputation as being a pro-health coalition.

However, what grossly overshadows this modest legislative success is the complete lack of mention of the most dangerous policy in the European tobacco market: Codentify.
Without the prevention of Codentify, all the aforementioned laws, and any future laws could prove completely obsolete.

For those who aren’t aware, Codentify is a technological regulatory system aimed at preventing the manufacturing, shipping and sale of counterfeit tobacco products. The purpose of such a system is to be able to track and trace all legitimate sales, and thus determine what is or is not a legal form of tobacco.

The reason such a system needed remains multifold. Firstly, the counterfeit tobacco market tends to use lower-quality and more harmful tobacco in their products since they are beyond the scope of health regulations. The source and delivery of these products are even linked to terrorist organizations in the Middle East and North Africa. This inevitably makes the customer more at risk of health issues, and without the proper knowledge of the carcinogenic potential in the cigarette he or she was smoking.

Moreover, the counterfeit market allows many large tobacco corporations to evade millions of Euros in taxes that they would otherwise be giving back to citizens. This gives a major incentive for these tobacco corporations to actually participate in the counterfeit market. In fact, there have been many cases linking direct involvement between tobacco executives and the illegal sale of tobacco products both domestically and overseas.

Which makes it all the more ironic that the Codentify system was actually conjured up by Big Tobacco, and lobbied by them as well. This conflict of interest alone should be reason enough to be skeptical of the Codentify and block any attempt of implementing it in Europe.

Yet even the system itself has proven to be unreliable – primarily because it lacks any real track and trace system necessary for monitoring the counterfeit movement and sale of tobacco. When we look at all these reasons, the fact that Codentify still receives a general level of support in the EU Parliament is astonishing and baffling – especially when we receive news of superficial laws like those the New York Times relayed this week.

In closing, while anti-tobacco leaders have a right to celebrate their win in the EU High Court today, they must not lose the forest for the trees, and should concentrate their efforts on blocking Codentify from being implemented in the European Union as soon as possible.