The Maclean's Excerpt

When Money Meets Politics

In a system that actively encourages abuse, Big Tobacco uses every weapon at its disposal to save its business

Aaron Freeman April 10 2000
The Maclean's Excerpt

When Money Meets Politics

In a system that actively encourages abuse, Big Tobacco uses every weapon at its disposal to save its business

Aaron Freeman April 10 2000

When Money Meets Politics

The Maclean's Excerpt

In a system that actively encourages abuse, Big Tobacco uses every weapon at its disposal to save its business

The corrosive influence of money on the democratic system is the subject of a new book by Aaron Freeman, 30, a founding director of Democracy Watch, an Ottawa-based advocacy group. In this excerpt from Cashing In, he looks at one of the most potent and best-financed lobbies in the capital, the “Tobacco Dream Team. ” These tobacco lobbyists have had considerable success in the fight to protect their business from lawsuits and antismoking laws. Although the percentage of Canadians who smoke has been declining for a decade, the industry's profits keep climbing—to $1 billion a year.

Aaron Freeman

An organized crime syndicate succeeds when it uses illegal acts to ensure that people comply with whatever it is that the syndicate desires. Control over people is the source of the syndicates power. Illegal activity is the used to obtain it.

The tobacco lobby is no different. It controls the lives of millions of people by addicting them to the product. It controls governments through sophisticated lobbying. And it controls public policy by manipulating public discourse. \ This extensive control, in turn, transforms

\what would ordinarily be an influential lobby into the most powerful shakedown artist in Canada.

\ The tobacco syndicate has even en-

I gineered a $ 1 -billion tax cut for itself

It took U.S. tax authorities until December, 1998, to uncover how tobacco companies had duped the Canadian government on the tax cut.

One tobacco company, Northern Brands International, owned by RJR-Nabisco, the U.S. parent of RJR-MacDonald, admitted selling 1.3 million cartons of Export A cigarettes to smugglers in 1994 and 1995 with, as the charge read, “wilful blindness to or conscious disregard of the fact that these cigarettes would be fraudulently diverted” from their declared destinations, Russia and Estonia.

In exchange for the company’s admission, the U.S. attorney’s office for the northern district of New York state agreed not to bring further charges against the company. (The bargain does not bind other jurisdictions.)

Northern Brands was described by RJR-Nabisco’s lawyer as “an entirely Canadian operation,” despite being incorporated in Delaware. The company is no longer active.

Meanwhile, the tobacco lobby in Ottawa pushed the Liberals for a tobacco tax cut on the grounds that Canada’s rel-

Reprinted with permission from Cashing In, copyright Aaron Freeman, published by McClelland & Stewart Ltd., Toronto.

atively high cigarette taxes were creating an incentive to smuggle cigarettes from the United States, resulting in a major law-enforcement problem. They succeeded in 1994, in reducing taxes. In Ontario alone, government revenue from cigarette taxes fell from $1.1 billion to $300 million.

Not bad work if you can get it. Reap millions of dollars through an illegal smuggling ring, then go to government for a tax cut to help fight illegal smuggling.

In 1999, U.S. courts demanded a $5 million (U.S.) fine and the return of $10 million (U.S.) in customs that should have been paid on the Canadian cigarettes. By that year, the tax cut, a lower Canadian dollar and price increases in the

United States—the result of multibillion-dollar settlements between tobacco companies and state governments, which sued the companies to recoup the health costs associated with smoking—meant that cigarettes were actually up to $15 a carton higher in U.S. border states than in Canada. Nearly a year after the U.S. government fined the tobacco companies, the Canadian government finally launched a lawsuit against the same companies over the Canadian smuggling ring. The government sued in U.S. courts, using the Racketeer Influenced and Corrupt Organizations Act, which allows for triple damages against defendants found guilty of making money from criminal activity.

Needless to say, a foreign-controlled industry that kills 40,000 Canadians a year and replenishes the deceased by addicting newer, particularly young, customers has a major image problem on its hands. Especially in the face of a federal government and provincial governments that have been making efforts to force the industry to account for the massive health and economic impact of its product.

In recent years, the federal government has greatly tightened restrictions on tobacco advertising and sponsorship. A new federal Tobacco Act allows for tobacco advertising, but only in “adult” venues. It further limits promotion of cigarettes in the places where they are sold, and bans certain sales promotions such as coupons, gifts and the use of tobacco logos on clothing. And the most contentious provision limits promotion of tobacco products through sponsorship.

The industry’s public relations response is multi-pronged. The first strategy involves connecting the industry to as many political offices as possible. This keeps the industry informed about political developments and provides a potential avenue to influence these decisions, making the fight against new health measures easier.

In cabinet, Finance Minister Paul Martin was a director at Imasco, owner of Imperial Tobacco, before entering politics. Treasury Board president Lucienne Robillard’s riding is StHenri-Westmount, where a large Imperial Tobacco plant is located. Her campaign director and riding association president is Simon Potter, a tobacco industry lawyer and lobbyist for the Canadian Tobacco Manufacturers Council.

In the Senate, Liberal senators Michael Kirby and Roch Bolduc were both directors at RJR-MacDonald until 1998, while Conservative senator William Kelly is chairman of the Rothmans board. Rothmans also has connections to the senior levels of the bureaucracy. Pierre Gravel, a former deputy minister of National Revenue, and Paule Gauthier, chairman of the Security Intelligence Review Committee, both joined the board in 1998.

And then there are the party connections. One of the newer members of the Imperial executive is Quebec lawyer Pierre Fortier, who joined the company in October, 1998, as vicepresident, corporate affairs. Fortier helped Joe Clark emerge from his campaign debt after he lost the party’s leadership to Brian Mulroney in 1983. He then went on to become president of the lobbying firm Public Affairs International, a Toryconnected firm that flourished under Mulroney. After the Tories were decimated in the 1993 election, Fortier helped rebuild the party and eventually became the party’s national president. He stepped down from the post to take the position at Imperial.

Guy Coté, a well-known CBC journalist before becoming the press secretary for Ontario premier David Peterson from 1983 to 1989, serves on the RJR-MacDonald board. Judy Eróla, a former Liberal minister of consumer and corporate affairs who left politics to become the head of the Pharmaceutical Manufacturers Association of Canada, left the PMAC in 1998 and now serves on the Imasco board.

Several of Brian Mulroney’s former staffers now work for tobacco companies. Former chief of staff Norman Spector is vicepresident of Imperial Tobacco, and another former Mulroney chief of staff, Bernard Roy, is an Imasco director. Mulroney’s former press secretary, Marie-Josée Lapointe, is communications director for the Canadian Tobacco Manufacturers Council.

Big Tobacco’s second strategy is to ensure that key politicians hear from them constantly. The companies have more than 20 registered lobbyists, and this figure does not include the lobbyists employed by their allies—the groups they fund, such as the Alliance for Sponsorship Freedom, as well as groups that share their lobbying platform (for example, advertising groups such as Gallop & Gallop and event organizers such as Grand Prix Management, both of which lost major revenue sources when the tobacco advertising restrictions were implemented).

Bruce Murdock is a former aide to former immigration minister Sergio Marchi and former chief of staff for the B.C. Liberal party. Liberal staffers who play on the True Grit softball team in Ottawa widely respect Murdock’s performance as their third baseman. He’s never afraid of taking a ground ball on the body for the team. Fortunately for the tobacco lobby, this loyalty is for sale, and Murdock now lobbies for Imasco.

Mark Resnick, who heads the lobby group Parallax Public

Not only has the tobacco syndicate been successful in staving off regulation of its hazardous product, it managed to engineer a $ 1-billion tax cut

Affairs and is president of the lobbyists’ guild, the Government Relations Institute of Canada, is a lead lobbyist for the CTMC. He was also part of Paul Martin’s inner circle in his 1990 leadership bid.

The CTMC is headed by Rob Parker, a veteran lobbyist and former Conservative MP. CTMC lobbyists include David Small, who worked on Joe Clark’s 1998 Tory leadership bid, and Bill Neville, one of Ottawa’s best-known and most established lobbyists. Neville, one of Joe Clark’s closest advisers, was a member of Brian Mulroney’s brain trust.

Other lobbyists on the Tobacco Dream Team include Marc Lalonde, a high-level Trudeau-era cabinet minister, who later became a hired gun for Alfred Dunhill; Herb Metcalfe, a Chrétien loyalist and former executive director of the Liberal Party Fund, who heads the Capital Hill Group, which represents RJR-MacDonald; Jean-François Thibault, a Capital Hill Group lobbyist and former secretary of the Quebec wing of the Liberal party; Torrance Wylie, head of the influential lobbying firm Government Policy Consultants and an Imasco director; Brian Levitt, president and chief executive officer of Imasco, who was an adviser on the 1997 Liberal campaign and was a leader in the No campaign during the Quebec referendum; and Jodi White, who was a chief of staff for both Joe Clark and Kim Campbell and also campaign chairwoman for Jean Charest in the 1993 election. White then became vice-president, corporate affairs for Imasco, a position she recently left.

Through the many tools of influence it has developed, the tobacco industry has been very successful in staving off regulation of its hazardous product. If there is a way to thwart government efforts to regulate tobacco, the Tobacco Dream Team will find it, if not through its political connections or frontline

lobbying efforts, then through its stable of high-priced lawyers.

Moneyed interests play by different rules than the rest of us. When they don’t like how the world is treating them, they invest large sums of money in lobbyists, political advertising, and political donations to change things. They rely on revolving-door incentives to ensure that both elected officials and bureaucrats remain friendly and compliant. And, if all else fails, they use their size and influence to bully the government into giving them what they desire or to ignore their excesses.

A system that allows these abuses to occur is not clean, especially when preventive measures would be easy to implement. The abuses are simply the logical, predictable outcome of a regime that makes it almost as easy to do things under the table as to do them aboveboard.