10/06/2009

News / State Prevails in Lawsuit Against Out-of-State Tobacco Seller

TRENTON -- Attorney General Anne Milgram announced today that the state has prevailed on all counts of a lawsuit it filed a year ago charging New-York-based cigarette seller Red Jacket Tobacco with illegal business practices related to the advertising and sale, by mail order, of “tax free” cigarettes in New Jersey.

In a decision issued Friday, Superior Court Judge Maria M. Sypek ordered Red Jacket and its owner, Lesley A. Hoag, to pay more than $760,000 in penalties, costs and fees requested by the Division of Consumer Affairs and the Division of Taxation within the Department of Treasury, and permanently enjoined the company from doing business as it has been doing.

Judge Sypek found that Red Jacket violated state laws by selling cigarettes in New Jersey without a license, and by selling cigarettes not listed in the New Jersey Attorney General Tobacco Manufacturer’s Directory.

“This is an important outcome for New Jersey consumers and taxpayers,” said Attorney General Milgram. “Through our lawsuit, we have put a stop to tobacco sales practices that sought to evade taxation. We have also held Red Jacket accountable for deceiving New Jersey consumers with phony enticements for ‘tax free’ product, and for selling tobacco by mail with no regard for whether buyers were of legal age.”

In addition to finding that Red Jacket violated the law by selling cigarettes not on the Attorney General’s Directory, and by selling cigarettes in New Jersey without being licensed either as a tobacco distributor or wholesaler, the judge also found that Red Jacket violated the state’s Consumer Fraud Act. Specifically, she found that Red Jacket sent New Jersey consumers 60,000 Money Mailer advertisements that contained misrepresentations.

Those misrepresentations included statements that the cigarettes offered for sale were “tax free” when, in fact, taxes are due on them. Red Jacket also advertised that, “If we don’t have it, we can order it” when, by law, only cigarettes on the Attorney General’s Directory can be sold in New Jersey.

In ruling in favor of the state on all five counts of its lawsuit, Judge Sypek also found that Red Jacket engaged in unconscionable business practices including, but not limited to, selling cigarettes without tax stamps and selling cigarettes to a consumer without verifying that the consumer is at least 19 years of age.

The state’s original lawsuit was filed on October 10, 2008 following an undercover investigation by the Division of Consumer Affairs.

On two occasions, a Division investigator purchased cigarettes from Red Jacket Tobacco, which lists its address as a post office box in Salamanca, N.Y., by calling the telephone number on defendants’ Money Mailer advertisement. The advertisement had been mailed on three occasions to at least 20,000 New Jersey consumers.

Several cartons of the cigarettes bought by the investigator were brands that are not on the Attorney General’s Directory, including the 305’s brand manufactured by Florida-based Dosal Tobacco Corporation.

Altogether, Judge Sypek imposed a total of $721,500 in penalties against Red Jacket and its owner, Hoag. The court also awarded the state $38,245 in attorneys’ fees and $3,031 to cover the cost of the investigation.

The Red Jacket litigation was handled on behalf of the state by Deputy Attorney General Cathy A. Tully.

http://www.nj.gov/oag/newsreleases09/pr20091005c.html

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