State Cites Hanover Tobacco Wholesaler

Source from:  By JAMIE McCUNE Evening Sun Reporter 09/30/2008 10/08/2008

State Attorney General Tom Corbett filed a lawsuit Friday against a Hanover tobacco wholesaler that allegedly sold illegal cigarettes to retailers and failed to properly report its cigarette sales. The lawsuit against Hanover Candy and Tobacco Supplies Inc. is the first against a company for violating the Tobacco Manufacturer Directory Act of 2003 and the Tobacco Settlement Act of 2000, the attorney general's office said. Mitchell Small, President of Hanover Candy, said he did not know about the lawsuit until Sunday and that the company is being used as an example. The acts require that a tobacco company either join the Master Settlement Agreement - originally an agreement among the largest tobacco companies and attorneys general from various states that placed marketing restrictions on the companies and required them to pay money to the states - or put money into escrow accounts. Tobacco tax stamping agencies are then required to file monthly reports for tobacco sold from the non-MSA companies to calculate how much money the companies should be putting in escrow accounts, court documents said. The cigarettes of those companies that do not join the MSA and do not pay into escrow accounts become illegal to sell and are removed from the directory of companies, the attorney general's office said. On June 21, 2006, the attorney general's Tobacco Enforcement Section performed an unannounced inspection of Hanover Candy and Tobacco Supplies Inc. The inspection found 462 cartons of Way brand cigarettes in a storage room of the company's warehouse. The Way cigarettes were manufactured by Tabacalera Regional, S.A., a foreign manufacturer whose cigarettes were removed from the list in March of 2006. The cartons were not segregated or marked as not to be sold, court documents said. Hanover Candy bought its last shipment of Way cigarettes in the summer of 2005, Small said. According to Small, the company received a fax from the attorney general's office that said the brand had been removed from the list and asked whether the company had any in stock. "I faxed back to them that yes, we did. I did not try to hide the fact, (hide) the product," Small said. It was a week later that tobacco enforcement came and collected the contraband, costing him $10,000 in stock and tax stamps, Small said. Hanover Candy did respond to a fax requesting customer sales activity prior to the inspection and said the company had sold Way brand cigarettes since Jan. 1, 2006, court documents said. But the company never reported stamping and selling the cigarettes on its monthly reports on non-MSA companies. Small said the sales were reported and did not understand why the lawsuit was being filed now. The company is audited about every other year and the attorney general's office had ample opportunity to make the company aware there was a problem, Small said. A spokesman in the attorney general's office said the office has been in contact with the company since January, most recently on Aug. 8. There have been multiple notices warning that a lawsuit would be filed if it did not provide records of the Way cigarette sales, Assistant Press Secretary Eric Shirk said. The attorney general's office was left with no choice but to file a lawsuit, Shirk said. The sales were from so far back the receipts were no longer in the company's computer and had to be pulled by hand which takes time, Small said. He was ready to submit the records as well as a signed contract stating the company would no longer sell cigarettes deemed illegal by the attorney general's office and pay the approximate $1,000 in costs this week, Small said. The lawsuit will force Hanover Candy to not sell any more cigarettes whose manufacturers are not on the tobacco manufacturer directory and will enable the office to seek further penalties on future violations, the attorney general's office said. Enditem