SICPAthe hidden cost of selling trust
Prilly, Canton Vaudunlimitrust campus
This is the "unlimitrust campus", whose aim is to develop "technology solutions" that "promote the economy of trust".
This project is supported by the Canton of Vaud and the Swiss Federal Institute of Technology Lausanne (EPFL). Its aim? To create collaborations in order to stimulate research and entrepreneurship in the traceability sector as well as the security of digital and physical products.
The creator of this "ecosystem" is a family business born in the region at the beginning of the 20th century, Sicpa. This acronym is hardly a household name but most of the world’s population has at some point or another held an object containing the company’s flagship product: ink.
The probe continues, the Office of the Attorney General confirms, while declining to give further details. In Brazil, the company paid CHF135 million to end its legal problems and to be able to keep doing business there. Sicpa continues to plead innocence to the Swiss authorities.
Our reporting goes back to the origins of Sicpa and seeks to shed light on the turmoil it is undergoing. For several months, we investigated this most mysterious of Vaud companies by delving into federal archives, analysing court documents, deciphering the company's activities abroad with the help of correspondents, industry insiders and experts. Most of our sources spoke on condition of anonymity.
From cows to bank notes
From cows to bank notes
"He was an extraordinary person with a real sense of industry," recalls a Lausanne lawyer whose parents were friends with the Amons. "He was a shrewd businessman and became successful because of his enormous capacity for work and his reputation as a gentleman. He was rigorous, a man of his word, strong, fair and very generous. He also had a great sense of family."
In 1952, Albert Amon convinced his friend Gualtiero Giori, an Italian printer, to move to Lausanne. The collaboration between the two factories was close. Sicpa took advantage of these years to boost its brand, find new customers and increase the number of laboratory tests to improve its product. Maurice Amon -- and especially Albert – took pains to register a patent for each invention, and even, in partnership with the University of Lausanne, created an industry norm for inks applied to banknotes. Today, the company says it owns more than 5,000 patents.
Illicit global trade accounts for nearly CHF500 billion ($500 billion) in losses per year, according to the latest report by the Organisation for Economic Co-operation and Development (OECD) on the subject. This crime eats into the revenues of governments, which miss out on taxes on a range of products.
For Switzerland, the loss is estimated at CHF4.45 billion in 2018. The clothing, footwear, leather and related products sector suffered the greatest losses (12.5% of the sector's exports), followed by the watch and jewellery sector (6.1% of the sector's exports).
A market without borders
A market without borders
In two decades, Sicpa has signed more than 33 contracts in 22 countries. The system is currently operating in 17 countries, including six in Africa, according to the company.
If a hotel in Casablanca wants to serve whisky to its guests, it will have to buy it from an official shop or break the law. A tobacco shop in Los Angeles, California, will only sell stamped Marlboro or Camel cigarettes, and if they are not stamped, then it is selling illicit cigarettes.
The company extended a rare invitation to us to visit its headquarters in Prilly, an anonymous black rectangular building surrounded by windows crowned with the company logo, which consists of the intertwined letters S and A. Our meeting is extremely unusual. The company tends to decline interview requests from journalists. But this step is in line with the image of transparency that SICPA now seeks to project.
“It's a virtuous circle,” Milanese said. “Because locally, manufacturers quickly understand they will no longer be able to sell illicit products. So the market grows healthier, and the black market shrinks, which automatically increases tax revenues and GDP [gross domestic product].”
TogoTogo: the unattainable poster child
Revenues for the state have increased. According to a report published by the Ministry of Economy and Finance, in 2021, tax revenues on beer and tobacco rose by 35% from the years before the SICPATRACE system was installed. The Togolese revenue office estimates that smuggling in the country accounted for about 22 million euros of its GDP of 6.6 billion euros in 2020.
“The contract for product marking was awarded to Sicpa with no call for tender,” says Godson Ketomagnan, a Togolese journalist specialised in public contracts. “Yet the government introduced and adopted competitive tendering with a view to fighting corruption and collision. We know that direct contracts open the door to bribes and other evils.”
In its proposals to the Philippine finance minister, Sicpa claimed that the use of its technology would enable the government to stop rampant tax evasion by cigarette manufacturers. The loss to the country's public coffers amounted to $1 million a day, the company said. For $50 million per year for five years, Schwab promised, Sicpa could plug the leak.
Sicpa had spent millions of dollars studying how its invisible barcodes could be applied to every packet of cigarettes and developing readers to be located at the end of the production line and at customs booths at ports of entry – all for a cost of one cent per packet.
Sicpa then turned to southeast Asia, where economies were booming.
The contract was signed by a local company, Liberal Technology, for which Sicpa only acted as a subcontractor. According to a 2015 report by the University of Illinois and University of Cape Town, the Malaysian contract was awarded in an "opaque" process without a public tender. Quoting tobacco industry insiders, the report said the local company to which the contract was awarded was linked to Malaysian policy makers.
A document obtained by SWI under transparency of justice regulations reveals the background to the famous January 2007 dinner at the World Economic Forum in Davos. It comes from an investigation by the Swiss Attorney General’s office into Sicpa on suspicion of corruption of foreign public officials. This inquiry targeting the company's activities in several countries opened in 2014 and is still ongoing.
The office of the Attorney General reports on a meeting Hans Schwab and Maurice Amon held with Anthony Arroyo, the nephew of Jose Miguel Arroyo, the president’s husband. Anthony Arroyo was particularly well connected in Manila. In addition to his special relationship with the "first gentleman" of the Philippines, he could count on the support of another uncle, Iggy Arroyo, an influential congressman.
The new recruit's mission was to help Sicpa "manage relations with his uncle and the presidency," the attorney general’s report says. More seriously, "it was clear at the time that part of the commission was to go to José Miguel Arroyo," the Swiss document states.
According to the Office of the Attorney General, the pact with the Arroyo family was not limited to the SICPATRACE solution. Three years later, in 2009, a new deal was struck to supply inks to the Central Bank of the Philippines. A new “success fee” was planned, this time for a much higher amount. According to the document in our possession, this new bonus was worth $3 million per year over six or seven years, i.e. the duration of the ink supply contract.
After Sicpa, two competitors offered their own security marking solution to the Philippine government. These were a small, totally unknown Chinese company and the mighty Philip Morris and Fortune Tobacco Corp. This local joint venture, which Philip Morris founded with the Chinese-Filipino billionaire Lucio Tan, controls more than 90% of the tobacco market in the Philippines.
It is not clear whether the "success fees" agreed between Sicpa and President Gloria Arroyo's relatives were ever paid out or not. The Office of the Attorney General, like the firm, declined to comment on the matter.
Mixed fortunes in Brazil
Mixed fortunes in Brazil
In 2007, Brazil awarded the company a tobacco traceability contract. The government was also considering extending this solution to the collection of taxes on alcohol and soft drinks. This was a huge opportunity. Smuggling in the beverage sector cost the Latin American nation billions of dollars. In 2003, tax evasion was estimated to be worth 30% of total sales of non-alcoholic beverages, and 15% for beer.
Hired as a private consultant by Sicpa, Finkel had the ideal profile for the task at hand. He knew Brazil and had worked there for many years. In parallel to his activities for the Swiss company, he worked as a consultant for his own company, CFC Consulting Group.
The system Sicpa sold was expensive and complex. Instead of applying labels by hand at the factory, beverage manufacturers had to install machines on their production lines that automatically label each bottle. There was no room for improvisation. According to a study funded by the beverage lobby, tax revenues in Brazil increased by 20% after the SICOBE system was installed.
Operation Addiction (Operação Vício)
Finkel was not just any consultant. Instead of disguising its bribes as “commissions” to relatives of members of the government, the company left Finkel free to negotiate and pay the kickbacks to Fisch himself, according to the Brazilian prosecutor’s office.
One source said the amount was then deducted from a large commission – the size of which was not revealed by the investigation – paid by Sicpa as a reward for his efforts in winning the SICOBE contract.
In 2016, the SICOBE contract was not renewed. The machines Sicpa installed in factories were deactivated, and the beverage manufacturers had to revert quickly to the old manual system. For the company, this was a disaster. In June 2017, Sicpa announced 150 redundancies at its Prilly headquarters and 850 in Brazil.
On June 7, 2021, Sicpa signed a "clemency agreement" with the office of the Comptroller General of the Union, an anti-corruption administrative agency, agreeing to pay CHF135 million as "restitutions." In Switzerland, the maximum fine for corruption for a company is CHF5 million.
In a statement issued the same day, Sicpa acknowledged its "objective responsibility" for "irregularities relating to certain payments," while denying that "the contracts in question were obtained fraudulently." According to the Prilly-based company, "no involvement, knowledge or intention on the part of Sicpa concerning these payments made in Brazil has been established." Thanks to this agreement, Sicpa regained the right to bid for contracts in Brazil.
Charles Finkel's lawyer, Marcelo Bessa, immediately spoke in the Brazilian press to welcome the judgment, which, in his opinion, confirmed that there was "no crime of any kind in the concrete case".
In a dissenting opinion published alongside the decision, one of the three appeal judges considered that “the materiality and criminal authorship” remained “abundantly demonstrated: Marcelo Fisch played a decisive role in the choice of the company Sicpa by Casa da Moeda [...] in exchange for improper remuneration worth several million.”
His two colleagues did not follow this argument and decided to acquit Fisch. And if no one accepted a bribe, then no one paid a bribe. Finkel therefore benefited from the decision of the Court of Appeal.
“We are delighted with the court's decision to declare Mr. Finkel and Mr. Fisch not guilty of bribery," Sicpa said. “This decision means that the accusations against Sicpa in the proceedings against our former Brazilian consultant were unfounded, a position we have always held.”
The Brazilian decision risks weakening the ongoing Swiss federal legal procedures looking into the company and its director Philippe Amon. This originally concerned the company's activities in 14 countries. According to Sicpa, this figure has now fallen to four, including Colombia and Brazil. The Attorney General declined to comment on this point.
At the end of 2014, the US Department of Justice sent a curious document to the Swiss authorities: a "draft" request for mutual assistance. Normally, foreign authorities seeking Swiss assistance in legal investigations send a full request directly, which may be followed up with requests for further clarification. In this case, however, the Department of Justice didn’t go the whole way. It was content with just providing Switzerland with information on Sicpa’s activities.
On the basis of information received from the United States, the Office of the Attorney General opened an investigation against Sicpa in early 2015 for "corruption of foreign public officials." The inquiry also targeted Hans Schwab.
Unusually, however, the "draft" request for mutual assistance from the United States was never followed up with a formal request, according to our research. Nor was it possible to establish the context in which the American authorities were interested in Sicpa and its activities in the Philippines. Asked about this, the Office of the Attorney General would only confirm that the investigation into Sicpa was initiated "on the basis of information from a request for judicial assistance."
2015, annus horribilis
But while examining banking data produced by KBA-Notasys, federal investigators discovered links with its Prilly neighbour. The investigators found that the two companies had shared the same consultants in several countries to negotiate bribes for local officials.
After Brazil and the Philippines, the Swiss investigation was extended to 12 new markets: Togo, Ghana, Egypt, India, Kazakhstan, Colombia, Nigeria, Pakistan, Senegal, Vietnam, Venezuela, and Ukraine.
In September 2020, the part of the investigation concerning Hans Schwab was dropped. A few months later, the Office of the Attorney General dropped a new bombshell. On June 14, 2021, it confirmed to Gotham City, a Swiss investigative news website specialised in financial crime, that its investigation was expanded to encompass "the owner and current CEO of Sicpa," Philippe Amon.
The federal investigation is ongoing. The presumption of innocence applies, both to Sicpa and its CEO.
The company affirms that it is "cooperating fully" with the federal investigation, while denying any responsibility. "We deny that our company was involved in or had knowledge of any illegal conduct by any of our outside consultants," the company says. "We are confident the investigations will prove that our company and CEO are not criminally liable."
When asked by SWI, Hans Schwab declined to comment. According to our information, the thousands of emails and documents seized by the Swiss Office of the Attorney General in its raid on Sicpa's premises would have shown that he was opposed to payments to some of the consultants mentioned here.
The family splinters
The family splinters
No one responded to our questions as to why he was sidelined. After all, Sicpa is not listed on the stock exchange, and its owners have complete freedom to make decisions as they see fit.
Monique appeared to have no career ambitions, so her male siblings competed for the top job. Maurice and Philippe managed the company together for five years. But the relationship between the two brothers was complicated, as a source close to the family explained. Maurice was a big-hearted man who loved to travel and party with friends. He was married three times and travelled the world on Sicpa’s behalf, preferring the glamour of Monaco to the shores of Lake Geneva.
What followed was a mad dash from one palace to the next in between shopping trips for masterpieces and extravagant jewellery. The couple's antics made headlines in celebrity magazines.
They posed at jet-set parties and held numerous receptions in their huge chalets in Gstaad. According to Capital magazine, the couple spent between 500 million and 700 million euros (CHF685 million) during these crazy years – all of it from the Sicpa inheritance.
In September 2015, Maurice filed for divorce in Monaco. Tracey did not back down. Fearing that the principality's law would be unfavourable to her, she challenged the jurisdiction of the Monaco courts and tried to have the divorce proceedings transferred to New York. The international press covered developments in what became a salacious soap opera with relish. For the Amon family, after generations of discretion, it was too much.
But this story of the separation between the two heirs could conceal another reality. In 2019, a Supreme Court judgment revealed that Philippe Amon had fired his brother Maurice in early 2015. The former accused the latter of developing business activities in competition with Sicpa without informing the board of directors. Even worse, Maurice Amon had invested in a contactless payment company called GoSwiff. This digital solution competed with the family business's cash cow: printing banknotes.
“The Sicpa group lives from and depends on the maintenance and development of the stock of banknotes in circulation," he continued. “All cashless solutions are therefore to our direct disadvantage, especially when they are adopted by Sicpa’s customers. There is therefore a serious and undeniable conflict of interest with your position within Sicpa as an employee and director."
The court determined that Maurice Amon's parallel activities certainly constituted a breach of his duty of loyalty to the company and justified his dismissal. However, Philippe Amon, who had been aware of the situation since 2014, only denounced Maurice in 2015. By delaying its response, Sicpa had lost the right to dismiss its "employee" with immediate effect, the court ruled.
Sicpa challenged the ruling at the Supreme Court. However, the final ruling on the matter came too late. On July 26, 2019 Maurice Amon died of a heart attack in St. Tropez at the age of 68. The Supreme Court ruled in his favour a month later.
The digital contradiction
The digital contradiction
To respond to this threat, Sicpa was forced to diversify into other sectors. First came tobacco and beverages with contracts in Brazil (2007), Canada (2008) and California in the United States (2020). The company then made a breakthrough in Africa, cinching deals in Morocco in 2010, Kenya in 2013, Uganda in 2018 and finally Togo in 2020.
Sicpa's flagship products
Sicpa's flagship products
In 2017, the company partnered with the Estonian company Guardtime, which has developed "digital government" solutions in its home country. In 2022, this collaboration led to a contract with the Swiss canton of Jura to ensure the security of digital official documents. This solution, called Certus, makes it possible, for example, to protect extracts from the texts of legal proceedings requested by citizens by means of a QR code.
In a 2021 report devoted to this paradox, the European Central Bank explained that at the end of 2020, the value of all euros in circulation amounted to 1.435 trillion euros (CHF1.42 trillion), an increase of 11% from 1.293 trillion euros in 2019. The coronavirus crisis amplified this upward trend.
"Our results indicate a non-negligible amount of hoarding, especially for high-denomination notes," the SNB saitd. It noted the phenomenon has increased "significantly since the turn of the millennium and the recent financial and economic crises.”
Households in rich countries no longer pay in cash, but some of them would prefer to keep their savings in banknotes under their mattress... if not elsewhere. According to The Economist, another factor behind this hoarding of high-denomination banknotes could also be the criminal economy, such as tax evasion,money laundering or drug trafficking. For Sicpa, the reasons don’t matter. The company earns its income from every new banknote printed. And the more that are printed, the more it prospers.
Multimedia production: Helen James and Carlo Pisani
Editing: Dominique Soguel and Virginie Mangin
Graphics: Kai Reusser
Project coordinator: Dominique Soguel
Translation (French-English): Catherine Hickley
Images: Yanick Folly (in Togo), Pascal Staub (illustration), drone footage (rights reserved), Reuters, SRG SSR / SWI swissinfo.ch, Keystone, swisscastles. chalamy.com, Getty Images, Sicpa, Wikimedia/commons, Agenzia, Fotogramma, Gotham City
Article republished on August 18, 2022 to clarify purpose of unlimitrust campus and to specify number of patents filed by the company.