Posted on 04/16/2005 6:46:41 AM PDT by Brilliant
Calls to a consumer complaint line tipped Philip Morris USA to a problem that's costing the cigarette giant and states around the nation millions of dollars and may be providing terrorists and organized crime with easy money.
The red-and-white cardboard packs customers were buying looked like Marlboros, but actually were made by counterfeiters profiting off one of the world's most recognizable trademarks. In one case last year, federal officials broke up a Texas-based ring and seized $18 million worth of counterfeit cigarettes.
Now Philip Morris is going state to state asking lawmakers to pass bills that allow law enforcement to better track sales, with the hope of removing illicit cigarettes from the market.
The company is asking states to require anyone involved in cigarette sales, from the manufacturer to the corner store, to be licensed and to document where they received their product. Wholesalers would have to make sure cigarette packs have tax stamps that prove they paid the state tax.
"We want to make sure that if a consumer is going into a store and paying $3, $4, $7, $8 a pack for a pack of our cigarettes, that they're getting the quality they've come to expect," said Jamie Drogin, a spokeswoman for Philip Morris, a unit of multinational Altria Group. "Why should anyone else care? Revenue."
Her point has already been proved in California, where the number of legal cigarette sales jumped by more than 42million packs the year after a law tracking sales was passed there. That helped raise $36.7million in cigarette taxes in a state where cigarette sales had been declining in recent years, said Anita Gore, a spokeswoman for the state's Board of Equalization.
Counterfeiters spend about $2 a carton to produce cigarettes and can sell them for as much as $70 a carton in places like New York, according to estimates by U.S. Immigration and Customs Enforcement, the investigative arm of the U.S. Department of Homeland Security.
"The total tax losses to this activity to the United States are estimated to exceed a billion a year. At the same time cigarette smuggling creates incredible profits for criminal organizations. It's an easy money-making venture and where does that money go?" said USICE spokesman Dean Boyd. "It's lining the pockets of criminal organizations or, God forbid, going to terrorist organizations."
A U.S. General Accounting Office report on cigarette smuggling published last year cited research from the Bureau of Alcohol Tobacco and Firearms that linked cigarette traffickers to groups such as Islamic Jihad and Al Qaeda.
"There are indications that terrorist-group involvement in illicit cigarette-trafficking, as well as the relationship between criminal groups and terrorist groups, will grow in the future because of the large profits that can be made," the report said.
In addition to California, laws have already passed in 11 other states from Alaska to Georgia and there's legislation pending in another 15. In Florida, state Sen. Mike Haridopolos is sponsoring a bill to make possession of counterfeit cigarettes a felony that carries up to five years in prison.
"This is a legitimate health risk ... besides the fact you're smoking cigarettes, because you don't know what you're getting in the product," Haridopolos said. "Second, it's untaxed, and third, if we continue to allow this to happen, you're going to have these (militant) groups such as Hezbollah finding another source of revenue."
A similar bill before the Florida House was approved Thursday; the Senate version must clear a committee before going up for a vote of the full chamber. Similar bills died in the Florida Legislature last year, most likely because some House members were afraid an unrelated cigarette tax bill would be attached to one of them.
"We would absolutely love to see legislation passed in all 50 states," Drogin said. "We've confirmed counterfeit (sales) in 19 states and have reasons to suspect it in 23 more."
The state laws deal not only with counterfeit cigarettes, but also contraband, or gray market, cigarettes. That problem involves people transporting cigarettes from a low-tax state and selling them in a state with higher cigarette taxes or importing legitimate cigarettes made overseas to avoid state and federal taxes.
Gray market cigarettes have been a problem for years. It wasn't until more recently that Philip Morris noticed the widespread sales of counterfeits.
"Consumers were calling in saying, 'It doesn't taste right, it tastes stale,"' Drogin said. "As part of our quality-control process we had them send it in, give us the information where they got it and what we were discovering is they were actually counterfeit versions of our cigarettes."
This is absolutely hurting our trademark - one of the most valuable trademarks in the world."
Most counterfeit cigarettes are coming into the country from China and other Asian countries through California, said Boyd. But the problem is spread throughout the country, he said, pointing to arrests made last year in a counterfeit cigarette ring based out of El Paso, Texas. Officials seized more than $18 million worth of counterfeit cigarettes in a case that also led to arrests in New Mexico, Florida, New York and California.
"It's not limited to any geographical area," Boyd said. "Criminal organizations are realizing that this is a way to earn substantial money with what they perceive as minimal or few risks."
PONG
I did encounter one of those packs sometime ago, but thought it was a legal knockoff. The pack was of a similar design (the crest was slightly different) and it had a different but similar appearing name. She offered me one, and after trying it decided I’d stick to the higher priced real Marlboro.
I prefer to think of this as a job creating endeavor being sponsored by helpful politicians hoping to provide exciting new career opportunities for their constituents.
What the state loses in tax revenue, the politician gains in campaign contributions.
Bootlegging cigarettes has always been around, the Mafia was into doing it back in the 50s. Your right though, the governments have taxed them so much people are going to bootleg them.
This is the first time in the past 1,000 years that the government has attempted to control substances through taxes or restrictions and the result was a black market.
No really, this has never happened before. Personally, I'm shocked and saddened by this unexpected turn of events.
Let's get LEAs involved in a "Cigarette War."
Yeah, that'll work.
Ok. Who's the damn rat fink?
Now Philip Morris is going state to state asking lawmakers to pass bills that allow law enforcement to better track sales, with the hope of removing illicit cigarettes from the market.
Oh! But to watch Phillip Morris's stupid quit smoking ads on TV which are being shoved down our throats, I thought they WANTED people to quit! But they are still selling cigarettes, aren't they? I hate that bunch. They talk out of both sides of their mouths.
"There are indications that terrorist-group involvement in illicit cigarette-trafficking, as well as the relationship between criminal groups and terrorist groups, will grow in the future because of the large profits that can be made," the report said.
Oh sure. Blame cigarettes and smokers for supporting the terrorist. That's the biggest and best lie ever! I roll my own, Phillip Morris pigs, so you will NEVER get my money! I'd stop smoking before I stooped so low as to support Phillip Morris again. (I need to wash my hands after even typing the name Phillip Morris. They make me want to throw up).
"We would absolutely love to see legislation passed in all 50 states," Drogin said. "We've confirmed counterfeit (sales) in 19 states and have reasons to suspect it in 23 more."
I bet he would. And I would sure love it if all smokers rolled their own. Then Puke Morris would never ever see another dime of revenue.
This is absolutely hurting our trademark - one of the most valuable trademarks in the world."
Nothing like patting themselves on the back! The Great Trade Mark forcing Quit Smoking Ads on TV down our throats? Just which side of (gag) Phillip Morris should we believe?
Afraid to order off of the Internet?
Then start rolling your own!!!
That's true, although the main reason is the wide disparity in state taxes (from $0.03 to $2.50). Personally, I would rather see high taxes all around on tobacco - with no revenue adjustment budgeted (to make it appear revenue-neutral).
Soon states like NY will try to tax the roll-your-own too. They will send you a bill for all those rolls you didn't pay the full tax on. They are already trying it by billing Internet buyers who bought outside the NY purview.
""It's lining the pockets of criminal organizations or, God forbid, going to terrorist organizations." "
Oh my GOD!!!!!
Hey Washington, this is far more important than our wide open border with Mexico, right??
I mean, aside from the whole contradictory advertising...
I'm asking seriously, not out of sarcasm. There must be a reason for your strong reaction.
many grey-market cigs come from oversees, and
counterfiters pay no taxes at all.
Not to poke holes in your idea, but...
Soon states like NY will try to tax the roll-your-own too. They will send you a bill for all those rolls you didn't pay the full tax on. They are already trying it by billing Internet buyers who bought outside the NY purview.
Tom, just a small surcharge is added to bags of loose tobacco. It will take a state years to slap a tax onto them and it will also take a long time to bump that tax up as high as they are now on just one carton of cigarettes.
I buy from a Smoke Shop in town. Plus, most of your grocery stores sell the filtered tubes and loose tobacco as well. It's all legal.
Smokers pay more for state services than non-smokers.
I mean, aside from the whole contradictory advertising...
I'm asking seriously, not out of sarcasm. There must be a reason for your strong reaction
You needed to follow the threads over the past years about Phillip Morris and the reason why we hate them so much.
I just don't have the time to get into it right now. Maybe someone else can fill you in this with 100 words or less. heh!
Excuse me PHILIP MORRIS..............YOU ARE THE PROBLEM.
Philip Morris should be fighting tax increases instead of pushing for more assinine legislation.
PM has actually been ENDORSING increased cigarette taxes throughout the country.
They are also pushing for legislation to force small tobacco companies to crank up their prices to contribute to th MSA.
Philip Morris and state legislautres pushing for higher taxes are KILLING our soldiers.
LOWER CIGARETTE TAXES.......but of course that is too simple a solution.
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