BAT bribed KRA officials to spy on rival Mastermind

Top-ranking Kenya Revenue Authority (KRA) officials received hefty bribes from cigarette maker British American Tobacco to spy on a rival firm, documents used in the BBC corruption exposé of the corporate scandal show.

The kickbacks were paid to the KRA officials to hand over tax files belonging to rival Mastermind Tobacco — maker of the Supermatch  cigarettes — to the London-based company, the BBC exposé says.

The KRA officials also pocketed huge bribes from BAT to make numerous tax demands from Mastermind, a strategy whose aim was to intimidate and damage the reputation of the homegrown Kenyan firm.

Paul Hopkins, who worked for BAT Kenya for 13 years and was the man tasked with arranging and delivering bribes to tax officials,
legislators, rival company insiders and United Nations representatives, made the revelations to the BBC’s Panorama programme.

“We paid the KRA guy, the right KRA guy a shed load of money. He issued all the tax demands. I mean we have tax demands now,” says Mr Hopkins in a leaked recorded telephone conversation with then BAT Kenya boss Gary Fagan.

The KRA has denied the claims and asked those with evidence of any wrongdoing by its officers to present such information to the anti-graft agency for investigation.

“KRA takes great exception to the unsubstantiated international media reports carried by the BBC. KRA does not condone any acts of corruption within its rank and file,” said KRA Commissioner-General John Njiraini.

“KRA welcomes public scrutiny of tax administration operations including the conduct of its staff,” said Mr Njiraini in a statement to the Business Daily.
Mr Fagan served as BAT Kenya managing director between 2008 and 2013 and was succeeded by Chris Burrell.

In the phone chat, Mr Fagan does not object to the elaborate bribery plans and assures Mr Hopkins, an ex-Irish soldier, that his job is protected “as long as you want one.”

The UK’s Bribery Act (2010) prohibits British companies from use of inducements to retain or win business deals anywhere in the world.

READ: BAT bribery scandal causes resignation at EABL

The London multinational shipped out Sh2.55 billion in dividends from BAT Kenya — where it owns a 60 per cent stake — in the period to December 2014.

The lid on the KRA’s bribes-for-tax-harassment scam has opened at a time when BAT is reported to have bribed Kenya’s former Trade minister Moses Wetang’ula for reasons that were not explained.

Bribe-taking taxman

The shocking picture of a bribe-taking taxman comes barely two months after President Uhuru Kenyatta ordered a lifestyle audit of all KRA employees in an effort to stop rampant corruption in the agency that costs the State billions of shillings in revenue leakages.

The exposé on widespread graft at Times Towers comes in the wake of the KRA’s failure to meet its revenue targets in the first quarter (July-September) of the current fiscal year that the Treasury has partly blamed for the biting cash crisis in government.

Two KRA officials were in October arrested in Naivasha for allegedly soliciting a Sh50,000 bribe from a hotelier. The two had reportedly demanded the bribe so as not to report the hotel for failing to use an electronic tax register (ETR) machine to issue receipts to customers.

This is the umpteenth time Kenyan government officials have been accused of taking bribes from corporate top dogs, cementing Nairobi’s dubious distinction as a hotbed of corruption.

Independent Electoral and Boundaries Commission chairman Issack Hassan and sacked Energy secretary Davis Chirchir (former commissioner at the Interim Independent Electoral Commission) top the list of public officials who were accused of taking bribes codenamed ‘chicken’ totalling Sh53.3 million to award tenders to British firm Smith & Ouzman in court papers filed in London.

Top executives at the Kenya Ports Authority (KPA), the Kenyan Air Force, the Ministry of Roads, the Ministry of Defence, the East African Portland Cement Company (EAPCC) and Telkom Kenya are said to have pocketed more than Sh153 million ($1.5 million) in hefty bribes from American tyre firm Goodyear Tire & Rubber Co. to award the company supply tenders, findings by US investigators show.

Oxford Publishing, another British company, was in 2012 ordered to pay £1,895,435 (Sh289.9 million) after it voluntarily reported to the UK’s Serious Fraud Office that some of its agents had paid bribes to Kenyan and Tanzanian government officials to win contracts to supply school books.

Macmillan Publishers in July 2011 paid a £11.26 million (Sh1.72 billion) penalty to the SFO after investigations revealed that it had bribed government officials in pursuit of public and World Bank-funded contracts in East Africa.

Infiltrated Mastermind

In the BAT bribery scandal, the British cigarette maker also reportedly infiltrated Mastermind’s C-suite to recruit executives who leaked sensitive information such as board meeting minutes, marketing plans, confidential financial data, trade secrets, production processes and expansion plans.

Mr Hopkins, the whistleblower, told the BBC that BAT splurged “a couple of a hundred thousand dollars” to discreetly buy data from Mastermind.

“Minutes of the marketing meeting are the most useful,” Mr Hopkins said, adding that he would get the reports within 12 to 14 hours after the meetings at Mastermind happened.

“The guy on the board, we’re gonna have to close him down. The guy in the KRA we’re gonna have to close him down. But they’re gonna have to get something reasonable to keep their mouths shut,” says the whistleblower in another recorded telephone conversation with Naushad Ramoly, then a lawyer at BAT.

BAT’s intelligence gathering bribery scheme saw the multinational amass nearly a dozen files from its Kenyan rival, in a race to gain competitive advantage over Mastermind.

“My job was to make sure the competition never got a breathing space,” said Mr Hopkins, who played a role similar to that of Trevy James Oyombra in the ‘chickengate’ scandal.

“It was explained to me that in Africa that’s the cost of doing business,” he said.

Mr Hopkins, an ex-Irish soldier, leaked hundreds of secret documents to a BBC editorial team implicating the multinational in bribery of government officials in Kenya and other African countries.

Wilfred Murungi, managing director at Mastermind, said the actions by BAT were shocking and called on Kenyan authorities to take action.
“It is terrible for an organisation that claims to be civilised to be involved in activities of this nature,” said Mr Murungi.

It is wrong. It is unjust and it is evil,” said the 70-year-old Kenyan entrepreneur who previously worked as a top executive at BAT before he quit in 1985 to take on his former employer.

Mastermind employs about 1,000 workers and pays an average of Sh2 billion in taxes to the government annually.

BAT dominates Kenya’s cigarette market followed by Mastermind, according to a study by research firm Euromonitor.

The growth in the population, rising disposable incomes and a young population with active night lives and higher disposable incomes has led to a rise in the consumption of tobacco products in Kenya,” says the market research firm.

About a fifth of Kenya’s adult population or 5.1 million people are smokers, according to studies by International Institute for Legislative Affairs, a public policy think-tank.

Kenya’s widespread graft is now seen as a risk to the economy, with Mr Kenyatta declaring the practice a national security threat recently.