FOR IMMEDIATE RELEASE
Contact: Todd Hallidy
Phone: (302) 577-8314
Date: July 23, 2001
A.G. FILES ACTION AGAINST FOREIGN TOBACCO COMPANIES
(Wilmington, DE) - Attorney General M. Jane Brady today announced that her office has filed civil enforcement actions in Superior Court against four overseas tobacco manufacturers. The complaints allege the companies failed to comply with a state law that requires annual payments to escrow accounts by tobacco companies that were not parties to the Master Settlement Agreement negotiated with the tobacco industry in 1998. Although the dollar amounts in dispute are very small, failure to diligently enforce the law could result in a reduction of the much larger payments scheduled to be made to Delaware by companies participating in the Master Settlement Agreement. Further, the escrow payments must be made in anticipation of possible future damage claims against the non-participating companies brought on behalf of Delaware smokers.
The companies named in the complaints filed today are Mangalore Ganesh Beedi Works and Mohanlal Hargovinddas (both based in India), and P.T. Bentoel Prima and Gudang Garam TBK (both based in Indonesia). All were manufacturers of exotic cigarettes distributed in limited numbers in Delaware in the latter half of 1999.
According to Attorney General Brady, "We must strictly enforce the law requiring this escrow money or we could risk losing hundreds of thousands of dollars owed to Delaware from the tobacco companies under the Master Settlement Agreement."
The complaint specifically alleges the companies failed to make the escrow payments required for the period between July 20, 1999 and December 31, 1999. The exact amount of the payments is determined by the number of actual cigarettes sold by each company during the period (at a rate of just slightly less than one penny per cigarette), and an adjustment for inflation. The calculations involving the number of actual cigarettes sold by each company during the time period were made by the Delaware Division of Revenue.
According to the calculations, Mohanlal Hargovinddas sold 25,455 cigarettes in Delaware during the period and was required to pay $247.09 to an escrow account. Mangalore Ganesh Beedi Works sold 8,727 cigarettes and was required to transfer $84.71 to escrow. P.T. Bentoel Prima sold 10,909 units and was required to transfer $105.89 to escrow, and Gudang Garam TBK sold 1,091 units and was required to transfer $10.59 to escrow. Based on the elapsed time since the violations, the Court could impose a 300% penalty for deliberate violations or a 100% penalty for unknowing violations. All four companies had been notified by the state twice about the escrow obligation.
Legislation is now pending in the Delaware General Assembly that would ban the sale of cigarette brands that don't comply with the required escrow payments or any other applicable state law. The bill, S.B. 231, is sponsored by Senator Patricia Blevins and Representative Deborah Hudson. According to Hudson, "We need to protect the state's financial interests, as well as the health of the citizens of Delaware. This bill is another step toward that end." S.B. 231 has passed the Senate and is awaiting final action in the House. Attorney General Brady supports the bill.