Fake cigars become burning legal issue

[Jimmy2]

Fake cigars become burning legal issue

The nation's biggest cigar maker has been on a mission to put suspected Cuban cigar counterfeiters from Little Havana to Hialeah out of business.

Fort Lauderdale-based Altadis U.S.A. paid tens of thousands of dollars to fund part of an undercover Miami-Dade Police probe of five suspects charged with trafficking in counterfeit cigars, court records show.

The first of three federal trials, set for today, raises controversial issues about the integrity of the investigation, the fake Cuban cigar market, and the U.S. trade embargo against the Castro government.

The police department, which normally funds its own investigations, said Monday it could not comment on Altadis' role in the probe because its legal department had not reviewed the matter and also because it involves a federal case. The U.S. attorney's office declined to comment. Altadis U.S.A. executives did not return two calls Monday.

Coral Gables lawyer Frank Quintero, who represents a defendant facing trial later this month, accused Altadis of trying to ''buy'' a criminal investigation from police for one purpose: to crush the alleged counterfeiters so the company can monopolize the U.S. market for Cuban cigars after Fidel Castro dies.

''It calls into question the impartiality of an investigation when witnesses including an informant are being paid by a private party that claims to be an alleged victim in the case,'' Quintero said.

Altadis U.S.A. fronted at least $17,750 to police for five undercover ''buys'' of allegedly fake Cuban cigars, boxes and labeling materials in three separate cases. Police returned about $4,000 in unused money.

Altadis also footed the bill for hauling away and storing seized materials for the upcoming trials, court records show.

INFORMANT PAID

The company also directly paid an informant who assisted Miami-Dade detectives in the undercover transactions, according to lawyers for the defense and court records. Altadis paid the informant $1,500 a week and other consulting fees from July 2005 until September 2006 -- plus $19,694 in relocation expenses.

The confidential source -- identified in federal court as Leonard V. Gutierrez -- was hand-delivered by Altadis executives to Miami-Dade investigators, court records show. Gutierrez himself is a former alleged Cuban cigar counterfeiter who won a $15.4 million Florida Lottery prize in 1992.

Investigators turned down Altadis' offer to pay for police overtime and other expenses, according to records.

E-mails show that detectives and federal prosecutors kept Altadis in the loop on the status of the investigation. A prosecutor in the U.S. Attorney's Office told Altadis' lawyers, an Altadis private investigator and police exactly when he was going to present the counterfeit indictments to the Miami federal grand jury last March, emails show.

In court papers, Altadis claims it holds the exclusive license for the U.S. trademarks for the famous Cuban cigar brands Montecristo, H. Upmann, Por Larranaga, Romeo y Julieta, Saint Luis Rey and Trinidad. Altadis holds those rights because its parent company, based in Spain, bought them from Cuba's exiled cigar-baron families decades after Castro's revolution in 1959.

The parent company, Altadis S.A., which now controls half the Castro government's cigar entity, says it avoids any violation of the U.S. trade embargo by selling Cuban-made cigars in Europe and by using the Fort Lauderdale subsidiary to sell Dominican Republic-made cigars in the United States.

Altadis executives and their trademark lawyers claim ''unlawful counterfeiting of these cigar brands is rampant in Miami-Dade County.'' They originally brought the case to the attention of Miami-Dade police and the state attorney's office last year.

'GENUINE' CIGARS

In a sworn statement, Altadis U.S.A. marketing vice president Eric Workman said the wholesale price of its ''genuine'' Dominican-made Montecristo and Romeo y Julieta brand cigars -- the two most widely counterfeited brands -- is $75 to $125 per box. The average retail price per box is $125 to $250, he said.

Workman estimated that a Miami-Dade counterfeiter of 1,000 boxes deprives Altadis U.S.A. of $150,000 to $200,000 in sales.

'That the counterfeit packaging material indicates Cuba as the country-of-origin for the counterfeit cigars further tarnishes our marks and misleads the public by implying that the Cubans are the true owners of the Montecristo, H. Upmann, Por Larranaga, Romeo Y Julieta, Saint Luis Rey and Trinidad trademarks and that our cigars are `counterfeits' or 'fakes,' '' Workman wrote in December 2005.

But defense attorneys for the five Miami-Dade suspects charged with counterfeiting Altadis' cigar brands counter their clients' counterfeit cigars and boxes are modeled after actual brands that have been made and sold by the Cuban government's Habanos S.A. since it nationalized the cigar industry in 1961.

As such, they claim their clients' products are not violating Altadis' U.S. trademarks for its Cuban-replica cigars sold in this country because the counterfeits' boxes say ''made in Cuba'' on them.

`THE LITTLE FISH'

Moreover, the defense lawyers assert that Altadis cannot protect its Cuban cigar trademarks in the United States because of the U.S. trade embargo. They argue that their clients -- who obtain their tobacco from Honduras and package their ''Cuban'' cigars in Miami-Dade -- cannot be charged with counterfeiting products with trademarks that do not legally exist in the United States.

''Prosecutors are going after the little fish when the big fish is in downtown Fort Lauderdale,'' said Coral Gables attorney Jose ''Pepe'' Herrera, whose client, Hialeah cigar box maker Juan Penton, faces trial today.

Herrera claims Altadis U.S.A. -- through its parent company in Spain -- is violating the U.S. trade embargo by using actual Cuban cigar trademarks to sell Cuban-replica cigars in the United States.

''So who is the ultimate counterfeiter?'' Herrera said.

He added that the alleged five counterfeiters actually sell cigars that buyers know to be a ''novelty,'' not the real thing. He stressed the defendants are not being charged with selling fraudulent products.

Quintero, who represents Little Havana cigar seller Feliberto Marimon, said Altadis U.S.A. should be the one under federal scrutiny. ''They're the ones who did the agreement with the Cuban government,'' he said.

Today's trial is likely to spark verbal fireworks.

During a Sept. 12 pretrial hearing, U.S. District Judge Federico Moreno poked fun at a federal prosecutor, saying the U.S. attorney's office was treating the cigar counterfeit case like a major cocaine-smuggling prosecution.

Moreno also jabbed assistant U.S. attorney Michael Gilfarb, who took over the case last month, for avoiding any mention of the ''C word'' -- as in Cuba -- while describing Altadis U.S.A.'s cigar brands.

At one point in the hearing, Gilfarb declared: ``Cuba is the third party here. There is no evidence to show Altadis U.S.A. is benefiting Cuba.''

The judge will have the final say on that issue at trial.

Source: Miami Herald

[Professor Twain]

I found a followup article after the trial:

Hialeah man guilty of selling fake cigarsThe first of three Cuban cigar counterfeiting cases ended with a guilty verdict in Miami federal court.

BY JAY WEAVER

[email protected]

When Juan Penton took the witness stand this week, he described himself as a Hialeah carpenter who made wooden cigar boxes stamped ''made in Cuba'' to sell as novelty gifts.

But on Friday, a dozen Miami federal jurors found him guilty of selling $3,000 worth of counterfeit cigars in those imitation boxes.

They concluded he was essentially copying famous Cuban cigar trademarks such as Montecristo, which are registered in the United States by its largest cigar producer.

The David-and-Goliath legal tale pitted Penton not only against the U.S. government but also the giant cigar company that funded part of the criminal investigation, Fort Lauderdale-based Altadis U.S.A.

Altadis representatives rejoiced over the verdict -- the first result of three federal prosecutions against five men accused of trafficking in counterfeit Cuban cigars.

''The goal is to send out a message -- don't do this,'' said Altadis' trademark lawyer Jorge Espinosa, of the law firm Kluger Peretz. ``It's not just damaging to our product; it's misleading the consumer.''

Penton, 43, who faces sentencing on Dec. 22, remains free on bond -- though prosecutors asked U.S. District Judge Federico Moreno to detain him in the meantime.

''Where do you think he's going to go -- Cuba?'' Moreno asked assistant U.S. Attorney Michael Gilfarb, noting that Penton's son was a Marine who is going to be shipped off to Iraq any day. The judge allowed Penton, a U.S. resident who now works as a truck driver, to travel only in Florida south of Orlando.

Penton, who came from Cuba on a raft 11 years ago, expressed disappointment about the guilty verdict. His attorney, Jose ''Pepe'' Herrera, plans to appeal and ask Moreno for a new trial. He said the verdict is a violation of the Helms-Burton law -- Congress' version of the U.S. trade embargo against Cuba -- because it implicitly protects Cuban trademarks.

Penton, found guilty on three counterfeiting offenses, faces a sentence ranging from probation to 18 months in prison because of the small amount of the counterfeit sale. Moreno had dismissed three other counterfeiting charges on Thursday.

Friday's closing arguments touched on everything -- from counterfeit Cuban cigars to the U.S. embargo against the Castro government.

Herrera lashed out at Altadis for manipulating the Miami-Dade police investigation of his client, which included an undercover buy of 60 wooden boxes of Dominican Republic-made cigars -- though the boxes said ''made in Cuba.'' Altadis gave police the $3,000 for that purchase.

Herrera argued that Penton was simply copying the famous Cuban cigar boxes that he recalled while growing up on the island nation -- not Altadis' U.S. versions.

''These are replicas,'' he said, stressing again and again that Penton was imitating authentic packaging materials for such famous Cuban cigar brands as Romeo Y Julieta.

He argued that the trademarks for those brands cannot be protected in the United States because of the nation's trade embargo against Cuba.

But Gilfarb challenged him.

''This has nothing to do with Cuba,'' he told the jurors. ``We don't have to worry about Cuba because of the embargo. What we have to worry about are people like the defendant.''

Gilfarb said the fact that Penton counterfeited only Cuban cigars ''misses the point'' because to do that ``he has to use the [Altadis] marks registered with the U.S. Patent and Trademark office.''

Altadis claims it holds the exclusive license for the U.S. trademarks for the premium Cuban cigar brands Montecristo, H. Upmann, Por Larranaga, Romeo y Julieta, Saint Luis Rey and Trinidad.

Altadis holds those rights because in the late 1990s, it acquired them from Cuba's exiled cigar-producing families whose companies were nationalized after the 1959 Cuban Revolution. Altadis' predecessor company had been making cigars under those brands in joint ventures with those families since the mid-1970s.

Its parent company, Altadis S.A., based in Spain, now controls half the Castro government's cigar entity, Habanos S.A.

From the Miami Herald

[Jimmy2]

Thanks Twain..

[El Presidente]

Nice work PT.

I may be a legal knucklehead, but for the life of me I cannot work out how Altadis can operate in the USA when it has a direct shareholding in Habanos s.a?

If legal FOH members can clarify I would love to know.