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West Wing aide to bean counter: Starbucks main man in British tax tempest

A police officer controls demonstrators outside a Starbucks coffee shop in central London in December.


Kris Engskov had his first brush with fame a few years ago when the television show The West Wing based one its characters, Charlie Young, partly on Mr. Engskov's experiences while working in the White House as a personal assistant to former president Bill Clinton.

Mr. Engskov is getting a lot more publicity in Great Britain these days as the regional manager for Starbucks Corp. He and the Seattle-based coffee-shop giant have been at the centre of a public outcry for months over charges it has paid almost no tax in Britain despite operating in the country for 15 years.

And there is no sign of the controversy letting up, even after Mr. Engskov apologized in full-page newspaper ads, offered discount coffee and committed Starbucks to paying $32-million in tax over the next two years regardless of financial performance.

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Last week, British Prime Minister David Cameron took a swipe at Starbucks during a speech at the World Economic Forum in Davos, Switzerland, where he vowed to put the tax-avoidance practices of Starbucks and other multinationals on the agenda at the Group of Eight meeting in June in Northern Ireland.

Mr. Engskov appears to be taking it all in stride, at least outwardly. When asked about the controversy on Tuesday during a charity event in London, he smiled and shook his head.

"It is an interesting time," he said. "We made a decision to pay corporate tax and that's what we're doing and I think that's the right thing. And we agree with the Prime Minister that all of us have a responsibility to pay our fair share of taxes and that's what we're doing."

There have been indications, however, that others inside the company are not taking the criticism so well.

Reports over the weekend quoted unnamed Starbucks officials as saying they are fed up with being singled out for attacks over legal tax practices, and some suggested the company told Mr. Cameron in a meeting last Friday it might reconsidered some of its investments in Britain.

Mr. Engskov played down those comments Tuesday, insisting Starbucks is in Britain for good.

"This is a great business for us and we are going to continue to invest here," he said. "It's one of the most important markets in the world and I think London particularly is one of the most dynamic and competitive espresso markets in the world and it's a great business for us."

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It hasn't always been so great. Starbucks came to Britain in 1998 after buying a chain of 60 coffee shops. It expanded quickly, opening hundreds of outlets in pricey London locations hoping to stake out a position as a top player.

But the rapid expansion proved disastrous. Soaring rents chewed up 25 per cent of annual sales, more than twice the rate of comparable stores in the United States. By the time Mr. Engskov arrived in 2011, Starbucks was closing dozens of unprofitable locations and had been surpassed by market leader Costa Coffee, which now has 1,300 outlets, nearly twice as many as Starbucks.

Mr. Engskov seemed an unlikely manager to put in charge. Born in Arkansas, he became enchanted with Mr. Clinton's presidential candidacy and landed a minor job in the White House after Mr. Clinton won in 1992. Mr. Engskov's role was essentially a "gofer," shuttling Mr. Clinton from event to event and catering to his needs. But it was enough for Mr. Engskov to become recognized as one of the young guns in the administration.

He left the political world in 2000, worked briefly for a venture capital firm in Seattle and then wrangled a job with Starbucks in 2002, in part by badgering chief executive Howard Schultz, whom he had met during his days with Mr. Clinton. Mr. Engskov started out in government relations but moved into management in 2005, taking on various regional jobs in the United States and Europe. In 2011, he became regional manager for Britain and Ireland, Starbucks' largest market outside North America.

At first, his job was to reorient the business by closing costly locations, refurbishing other outlets and revamping the coffee lineup. Last fall everything changed when Starbucks became the focal point for growing public anger over corporate tax avoidance.

It is no secret that multinationals move money to offshore subsidiaries in lower tax jurisdictions. But in a time of austerity and budget cuts, Starbucks and other companies became easy targets for British protesters and politicians.

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It didn't help that Starbucks said it had made money only once in 15 years in Britain, which the public and politicians found hard to believe, and that it had paid less than $15-million in total tax over that period despite piling up more than $4-billion in sales.

Mr. Engskov tried to win back public support by apologizing and promising to pay more tax. That fell flat and led to charges the company was trying to pick and choose how much tax to pay. Prime Minister Cameron piled on, saying Starbucks lacked "moral scruples."

On Tuesday, Mr. Engskov put on a brave face and vowed to press ahead. "Look, we announced plans to create 5,000 jobs and open 300 stores here in the next five years and we're going to do that, we're on track to do that," he said. "We are hiring 1,000 apprentices over the next two years, we're on track to do that."

When pressed about how the attacks have played on him personally, he demurred. "I prefer not to talk about it."

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About the Author
European Correspondent

Paul Waldie has been an award-winning journalist with The Globe and Mail for more than 10 years. He has won three National Newspaper Awards for business coverage and been nominated for a Michener Award for meritorious public service journalism. He has also won a Sports Media Canada award for sports writing and authored a best-selling biography of the McCain family. More


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