Sunday

22nd Jan 2017

Investigation

Part V: Dalli’s big tobacco theory

  • John Dalli says the tobacco industry was out to get him (Photo: Charles Roffey)

John Dalli claims that his tough stand against tobacco as EU health commissioner led the industry to pull levers inside the European Commission to get him ousted from office.

He had been given the job of reforming the 2001 tobacco products directive (TPD), a vital part of the EU’s strategy to reduce tobacco consumption in Europe.

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Dalli’s new draft would step up rules on smokeless tobacco, ingredients, labelling, cross-border sales, and illicit trade - making it more difficult for the industry to ply its trade in Europe.

He told EUobserver that “in a meeting on 11 November 2011, [EU commission] president Barroso tried to dissuade me from continuing with the TPD. I refused”.

When asked how the industry plot against him worked, he pointed to the EU institutions and member states’ intimate relations with big tobacco.

Philip Morris and the €1bn deal

In July 2004 the world’s largest tobacco firm, Philip Morris (PMI), signed a 12-year anti-contraband and anti-counterfeit agreement with the EU and 10 member states.

It agreed to pay around €1 billion to help finance a crackdown on illicit trade in tobacco products and counterfeit cigarettes.

Almost all of the money goes to member states, who use it to purchase items such as airport scanners and sniffer dogs.

In return, the commission dropped a US court case against PMI, which had accused the company of complicity in cigarette smuggling by intentionally oversupplying some European countries.

“It [the €1bn contribution] also brought to an end all past disputes between the EU and PMI relating to this issue,” a PMI spokesperson told this website.

The PMI deal is worth billions more to EU countries in terms of tax revenue.

Stricter surveillance of supply chains means some 58 billion counterfeit cigarettes were removed from the EU black market over a six-year span.

When the pact was signed in 2004, the 10 EU governments which took part were complaining of losing hundreds of millions of lost tax revenues from the illegal trade.

Even with the stricter controls, EU governments last year lost €10.9 billion.

The net benefit is unclear because the money they make from tobacco tax has to be weighed against how much they spend on healthcare.

The annual EU public expenditure on treating tobacco-caused diseases is around €25 billion while tobacco kills some 700,000 people a year in Europe.

Petite coincidences

The EU’s anti-fraud office, Olaf, along with the then head of the EU commission's legal services, Michel Petite, helped broker the PMI agreement.

Petite, who signed the pact on behalf of the commission, headed its legal services from 2001 to the end of 2007.

But today he works for the Paris-based law firm Clifford Chance, which counts PMI as one of its clients.

In September 2011 and again in September 2012, he met with his former colleagues in the commission’s legal services to explain his views on tobacco legislation while Dalli was working on his new TPD.

Petite also played a direct role in Dalli’s departure.

Snus maker Swedish Match says that when Dalli’s intermediaries tried to solicit a €60 million bribe the firm refused and decided to report the crime.

But instead of going directly to Olaf with its allegations against Dalli, his friend Silvio Zammit, and Zammit’s associate Gayle Kimberley, they went to Clifford Chance’s Petite.

“At our request he [Petite] contacted Ms. Catherine Day and we submitted a written report on the matter,” Swedish Match’s senior vice-president Fredrik Peyron said, according to the leaked Olaf report.

Day is the commission’s secretary general - its most powerful civil servant.

She forwarded the report - “Allegations by Swedish Match” - to Olaf chief Giovanni Kessler on 24 May 2012.

Acting with lightning speed, Olaf launched an internal investigation 24 hours later.

It said the origin of the complaint was the commission itself - in effect, Day - and not Swedish Match.

Still acting with great speed, Kessler in July turned up at Peppi’s in Malta to question Zammit on whether he had somehow defrauded EU funds.

Meanwhile, Petite’s relationship with the commission was not limited to his Clifford Chance lobbying or his Dalli accusations.

His close ties with his former employer were also on show back in 2009 when he was appointed head of the commission's ad hoc ethics committee - a body which issues advice on whether commissioners can take up jobs in industry without conflict of interest.

NGOs complained that the tobacco lobbyist’s post on the committee is in itself a flagrant conflict of interest.

But the commission was happy to let him stay in the job until December 2013 despite the simmering anger of civil society.

Petite later told this website that he stepped down in 2013 due to workload pressure.

Delay, weaken, defeat

The old PMI deal and Petite’s role as a go-between for industry and the commission do not prove that there was an anti-TPD plot.

But for Dalli the tangle of financial interests and personal relationships represents circumstantial evidence.

“Olaf’s statements showed total submissiveness to the tobacco industry,” he told EUobserver.

He noted that the cover letter of Kessler’s report into the scandal even says that the affair risked damaging relations between the European Commission and tobacco producers.

Dalli added that as a result of him being fired, the TPD was delayed and weakened.

The TPD bill was originally due to be finalised on 22 October 2012.

The last deadline to postpone its publication was 15 October - the day before Dalli says Barroso told him to pack his things and get out.

But with Dalli gone, the TPD could be legally placed in “suspended animation”, as it was, until it finally went public in mid-December.

While Dalli was still in office, Day already delayed his bill twice and knocked some holes in his ideas.

The TPD was subject to two impact assessment reports by Day’s office on its economic, social, and environmental consequences.

After the first assessment - in March 2012 - the TPD still had the ban on oral tobacco and proposed a phase out on sales of nasal tobacco. It also called for strict medical regulation of nicotine-containing products, such as electronic cigarettes.

After the second assessment - in June 2012 - the TPD still maintained the ban on oral tobacco. But it allowed the “marketing” of electronic cigarettes.

Day and the commission’s legal services then “in principle” approved the new TPD draft.

Their approval is a necessary step in the commission’s internal protocols before the next step, “inter-service consultations”, can start.

But in August 2012 Day halted the inter-service consultations and requested another TPD review by the legal services.

The Testori email

On 7 September 2012, Paola Testori - the head of the commission's directorate for health and consumer affairs (DG Sanco) - sent an email to Day and to Luis Romero Requena, the head of the commission’s legal services.

The email - obtained by New Europe, a Brussels-based publication - is entitled “Tobacco Products Directive”.

Testori summarizes in six bullet points a meeting which she, Day, and Requena had held a few days earlier on the latest changes to Dalli’s proposal.

She says: “chewing and nasal tobacco is no longer banned, but only subject to labeling and ingredients regulation”.

She also records other pro-industry changes: removing a line on plain packaging (full standardisation) as an option and mentioning the need to ensure “a level playing field for pharmaceuticals [firms]” on electronic cigarettes.

“In conclusion I trust the new text reflects our agreement and I hope we could agree to launch an interservice consultation soon,” she adds.

The email was written the same month that Petite met with Requena’s services to explain big tobacco’s views on EU legislation.

When EUobserver asked Testori about the meaning of the 7 September email, the Italian official declined to give details.

“I cannot give you clarity. I do not remember. I do not know the story and I tell you, I also appeared in front of a committee of inquiry so I am not able to say anything,” she said.

Numbers don’t lie

Despite her email note that “chewing and nasal tobacco is no longer banned”, Testori noted that "chewing tobacco" is not snus and that snus did stay banned in the final version of the TPD.

She also pointed out that the TPD is considerably stronger than the EU’s previous tobacco law from back in 2001.

She is right.

But a “quantitative text analysis” of the evolution of the new TPD’s draft texts shows that the final version of the bill was warped in industry’s favour.

The study was carried out by researchers from from Oxford University, the University of Bath, the UK Centre for Tobacco and Alcohol Studies, and the London School of Hygiene & Tropical Medicine.

They counted the frequency of pro-healthcare words, such as “health” or “warn”, and the number of pro-industry terms, such as “economy”, in each successive draft.

It looked at the period 2009 to 2014. After the TPD proposal was published in December 2012, EU member states and MEPs also made their mark.

But between 2009 to 2012 the texts were exclusive commission property.

The result of the analysis, published in Tobacco Control, an offshoot of the prestigious British Medical Journal, on 13 August 2014 said: “The EU legislation shifted significantly towards the tobacco industry’s position”.

It added that the “significant textual shifts correspond to substantial policy changes”.

Requena, for his part, was called in by Barroso on 16 October as one of two witnesses for the meeting in which the commission chief clams that Dalli resigned.

The Maltese politician described it as a “choreography” which had been rehearsed ahead of time.

Requena also later testified against Dalli at the EU court in Luxembourg.

“It is as if one stabs you in the back and then asks you whether you want him to say it was suicide or murder,” Dalli said at the time.

In this series of eight articles, EUobserver reporter Nikolaj Nielsen takes a closer look at events which, in the words of one MEP, will haunt Brussels for the next 10 years to come.

Introduction - EU smoke & mirrors

Part I - From Peppi's to Barroso's

Part II - Malta's 'Mr Teflon'

Part III - Actors assemble for EU melodrama

Part IV - EU judges, Maltese mysteries, and Christians in the Caribbean

Part V - Dalli’s big tobacco theory

Part VI - A 'circumstantial' EU hanging - will be published on Monday 10 November

Investigation

EU smoke & mirrors

EUobserver reporter Nikolaj Nielsen sheds new light on the Dalli lobbying scandal, which, by Barroso's own admission, threatened to bring down the EU executive, but which is not over yet.

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