Marlboro: India investigates Philip Morris and Godfrey Phillips for FDI violation
March 8, 2019 | Brainwave Science
Enforcement Directorate (ED), India’s leading financial crime-fighting agency, is investigating Philip Morris International Inc, maker of Marlboro, and its Indian partner Godfrey Phillips for alleged foreign investment laws violation in India.
The Indian government-imposed restriction on Foreign Direct Investment (FDI) in cigarette manufacturing sector in 2010, saying this would strengthen efforts to suppress smoking.
Ahead of the FDI prohibition, Philip Morris used an alternative approach to beat the policy and formed a new wholesale trading company with Godfrey Phillips. Since then, Godfrey has acted as a contract manufacturer of Marlboro cigarettes in India, while Philip Morris’s majority-owned local unit act as a wholesale trading company and promotes the brand. However, restrictions on FDI leaves cigarette manufacturing largely in the hands of domestic players and various foreign cigarette companies exited India, citing an “unsustainable business model”.
According to reports, Philip Morris is accused of paying manufacturing costs to Godfrey Phillips to makes its Marlboro cigarettes, circumventing a nine-year-old government ban of foreign direct investment in the industry. Enforcement Directorate personnel reviewed dozens of internal company documents such- invoice bills, legal agreements, emails and accounting statements- which were dated between December 2013 and January 2018, showed billing of INR 4.55 crores between Philips and Godfrey.
Bhure Lal, A former head of ED, said the companies “should be investigated… they are camouflaging”. The central probe agency believes the scope of the investigation is much broader than the alleged foreign investment law violations.
Dozens of internal company documents showed Philip Morris has been indirectly paying costs related to Marlboro cigarette manufacturing in India in a phased manner. Godfrey Phillips’s head of corporate affairs, Harmanjit Singh, said all the commercial arrangements “are in complete compliance with the extant regulations governing” India’s foreign direct investment and other laws.
Indian economy is the second largest economy in Asia. A country of billion plus population offers lucrative and diverse business opportunities across all industries and sector. Therefore, India is considered as one of the most famous and popular destinations for many leading companies and investors from developed countries as the business in India promises a good return on investment.
According to United Nations Conference on Trade and Development (UNCTAD), India has conspicuously emerged out as the second most popular and preferable destination in the entire world, after China, for highly profitable foreign direct investment.
The proposed ban on FDI in India’s tobacco industry means that domestic players such as ITC and others are likely to remain dominant, leaving little or no room for growth among foreign players such as Japan Tobacco International and Philip Morris. However, recent allegations against Philip Morris International demonstrates that Philip Morris found a back door and influenced Indian tobacco industry regardless of the prohibition.
With the restriction on Foreign Direct Investment (FDI) in cigarette manufacturing and exit of foreign players like Japan Tobacco, Philip Morris is the sole foreign company gaining huge returns and monopolizing the market since 2010. Irrespective of the acquired evidence, investigating this case would be exceptionally challenging for law enforcement agencies as these billion-dollar companies operate on discretion and fool-proof structures and uncovering every link and connection is a very complex and lengthy process to reveal the truth behind this case.
As the general election approaching, it is mandatory for the ruling party- BJP and law enforcement agencies to crack this case open within a record-breaking time. In order to that, Indian law enforcement agencies need to investigate this case thoroughly to reveal the truth, identify the off-book records and expected tax-frauds, identify the prominent people and corrupt government official involved, if any. Investigating financial crime is a tedious process due to lack of substantial evidence as suspects would not cooperate to provide accurate intelligence and evidence and it becomes more complex as the existing conventional interrogation and intelligence gathering techniques opted by financial crime personnel to investigate such cases do not provide accurate crime-related information or what information they possess, leaving the law enforcement agency in a dilemma.
If the Enforcement Directorate finds Philip Morris in violation of the FDI rules, the Indian government can impose huge penalty depending on the amount contravened and ban the company within the country, therefore, another victory for the ruling party-BJP for swift actions not only toward terrorism but also in high-profile financial scandals. But here the question is “if”, as law enforcement agencies opt for the existing conventional interrogating and intelligence gathering tools are outdated, time-taking process, don’t guarantee accurate results and do not reveal what information a suspect possesses and is trying to conceal from the investigator. So honestly, what option does law enforcement agencies have?
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Indian law enforcement agencies should utilize iCognative technology in such complex cases where cases are stretch due to lack of substantial evidence and information. iCognative is the only forensic and scientific technology that guarantees to reveal the truth and no perpetrator would remain unpunished for his crime or support due to his/her smartness or lack of evidence. In this case, all the necessary crime-related information could be accessible and verified with almost perfect accuracy once a 45-minutes iCognative test is conducted by law enforcement personnel on Godfrey Phillips’s executives. Information such as: were Philip Morris illegally influencing the Indian tobacco industry, how much they paid to Godfrey Phillips for manufacturing, details of financials, off-book records, identification of executive and government personnel involved, verification of the testimonies of staff members, government officials etc., would be easily available to law enforcement personnel to investigate this case in the right direction once the test is completed and further provide evidence and information about corrupt government officials, other illicit business and major loophole in the law.
An assigned investigator uploads all investigative details since 2009 into the iCognative system protocol. The system records and analyzes the brain responses when case related known and confidential information (together called Stimuli) is flashed to the suspects on a digital screen in the forms of pictures, phrases or words and determine with over 99% accuracy what information suspect possess and/or trying to conceal from the investigator. iCognative goal is to protect the nation’s interest as the truth behind Phillips Morris’s intentions is mandatory for the smooth Indian economy.
Brainwave Science’s iCognative is the best weaponry for law enforcement personnel to investigate a financial crime which is loaded with tons of paperwork and are considered as a lengthy process. iCognative is the only hope for Indian PM Modi to crack this case within a few days, identify the perpetrator/s and protect the Indian economy and business market for such frauds.