try to snuff out
bogus brands
BY JOHN P. MARTIN STAR-LEDGER STAFF
Eric Aronson is a trademark lawyer. He represents the brand-name companies that get
ripped off when someone sells a look-alike item as the real thing., ft is a world typically
filled with handbags, watches and stuffed animals.
In the past few months Aronson has hit New Jersey's courts, then its streets, in defense of
an unlikely product: Newport cigarettes.
With a sealed court order and a deputy U.S. marrshal at his side, Aronson has raided
nearly a dozen Garden State stores on behalf of Newport's parent company, Lorillard. At
places such as Aldo's Cash and Carry in Camden and Matt's Wallington Mobil, the hunt is
on for counterfeit cigarettes. , ,
Bogus butts are flooding the globe. The number of counterfeit cigarettes seized
nationwide grew to 1.1 million cartons last year, a five-fold increase from just two years
earlier, according to the U.S. Customs Sere= ice. Already .reeling from anti-smoking
legislation and a rise in excise taxes, tobacco manufacturers are fighting back.
"I'm entitled to get this product' off the street be¬cause it causes (my client) irreparable
harm every day it's there," Aronson told a federal judge in Newark two weeks ago.
Since March, Lorillard has filed federal trademark infringement lawsuits against retailers
from Camden to Wayne who they say have bought and sold counterfeit cigarettes. More
cases are prom¬ised.
The frauds are hard to spot. The tip-off is often coding or al¬tered tax stamps that
suggest packs are more than a year old. Newport, with 8.5 percent of the U.S. market,
ranks second behind Marlboro. Its packs don't usually languish on shelves that long.
Otherwise, the packs look au¬thentic. Same box, same gold ring and lettering above the
filter.
But the smokes, officials say, are usually tasteless and stale, most likely grown
somewhere in China or India, not the United States. Sometimes they are not even menthol
- a slight image problem when the box sports the name of the nation's most popular
menthol brand.
The fake product takes a circu¬itous route, most likely smuggled into ports and ferried out
to vans and trucks that pull up in alleys be¬hind local retailers. There, mer¬chants buy
cartons for as much as half of the state fixed minimum price - now slightly more than $44 -
and resell them for twice as much. A retailer who sells 200 car¬tons a week could save
$10,000 in a month.
Lorillard also has turned to law enforcement for help at a time when authorities are
already exam¬ining if such trafficking could be a funding source for organized crime or
terrorists.
Last year, for instance, authorit¬ies charged several members of what they said was a
North Caroli¬na-based cell of Hezbollah, the Is¬lamic fundamentalists, with smug¬gling
and selling cigarettes stamped with a fake tax stamp. Prosecutors alleged the profits were
funneled back to terrorists in Beirut.
Aronson, a lawyer in the Flor¬
with federal terrorism prosecutors. Michael Drewniak, a spokesman for U.S. Attorney
Christopher Christie, said the office had no comment.
Joe Green, a spokesman with the Bureau of Alcohol, Tobacco and Firearms, confirmed
that agents have had discussions with Lorillard about the trafficking of counterfeit
cigarettes in New Jer¬sey. "We're gathering as much in¬telligence as we can," he said.
But the cases in New Jersey could also have legal pitfalls. U.S. District Judge Katharine
Hayden last month became the first to turn down a Lorillard request for court approval to
raid a Newark store.
Hayden ruled that the company had not presented sufficient proof that retailers were
complicit in the counterfeit scheme. She also said that such a raid, assisted by the U.S.
Marshal's Service, would be appropriate only after other meth¬ods, such as a restraining
order, had failed to halt the sales.
And a lawyer for one of the mer¬chants who had his inventory seized said he plans a
counterclaim against the tobacco company.
Hamdi Rifai, an attorney for Muhammad Huzein, who owns markets in Wayne and Fair
Lawn, called the seizures "outrageous." He said the clamor over counterfeit rings is a ruse
that tobacco officials have concocted to bolster their plea for lower taxes.
"The only way they are able to even argue that... is by taking ad¬vantage of people like
my client," said Rifai.
Green, the ATF spokesman, said the surge in counterfeiting has paralleled the increase
in taxes. Last year, the bureau established a special task force to focus on the trafficking
of counterfeit and smug¬gled alcohol and cigarettes.
The problem extends beyond American borders. In February, Iranian officials said they
burned 240 million sham smokes seized near Tehran. Weeks later, police in Kosovo
found and destroyed 20 million fake Marlboros.
Marlboro's parent company, Phillip Morris USA, was the first to launch a counterattack. It
formed a task force last year called the brand integrity group, and filled its ranks with
former federal law en¬forcement agents. Stings and in¬vestigations have since led to
law¬suits that target .612 retailers in
that could come from the litigation, the lawsuits have two purposes: to get the counterfeit
cigarettes out of circulation, and to pressure the store owners for information that might
lead to bigger players in the network and possibly criminal charges.
"In many of the cases where they're finding counterfeit product, their also finding
counterfeit tax stamps," said Jamie Drogin, a spokeswoman for Phillip Morris USA.
Lorillard launched its New Jer¬sey campaign this spring, after. sales staff found suspect
Newports during routine visits to retailers here.
Aronson, accompanied by a deputy U.S. marshal and a com¬pany representative, has
seized or identified packs of suspected coun¬terfeit butts in Loa Wayne, Tren¬ton,
Camden, Paterson, Fair Lawn, Newark and Linden. They send them overnight for testing
in North Carolina. In all but one case, Aron¬son said, the cigarettes turned out to be
counterfeit.
Aronson said most of the tar¬geted store owners•,have been co¬
operative. But Rifai, who repre-' sents three merchants, said the company should be
targeting the traffickers, not the retailers who he-, said are unwitting dupes in the
counterfeit scheme.
"It seems like extremely bad business because they are victimiz¬ing the people who have
already been victims," said Rifai.
Tobacco companies are reluc¬tant to talk about their losses, but with, cigarettes retailing
at roughly $7 a pack in New York City, one million cigarettes can fetch $350,000. 11.
"The potential for significant profits are very real," said Steve' Watson, Lorillard's vice
president - of external affairs.
He said the high taxes imposed on smokers have drawn "well-orga¬nized crime
syndicates" to the trade, though investigators have yet to crack one.
Said Drogin, the Phillip Morris spokeswoman, "No one is really sure where the product is
coming from."
John P. Martin covers federal courts and law enforcement. He can be reached at (973)
622-3405 or at jmartin@starledger.eom.
