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02-May-2006
Firm aims to stamp out fake cigars

MIAMI - Theo Folz's view from his Fort Lauderdale, Fla., condo encompasses a prime expanse of the Atlantic Ocean and the Intracoastal Waterway, but for a time it annoyed him to gaze out from his balcony.

The vista also at one time took in a tobacconist who Folz knew was peddling fake cigars under the storied Cuban brand names belonging to his company.

"I found it particularly irritating," said the president and chief executive of Altadis USA, the world's largest cigar maker. "I could see it from the terrace of my condominium."

Folz is not putting up with it any more.

Fort Lauderdale-based Altadis USA is taking on the counterfeit cigar trade.

The crackdown comes as demand for top-drawer smokes is rising. Cigar-puffing had lost some of its allure at the turn of the century after the mid- ' 90 s celebrity-driven fad.

But last year, the number of premium cigars sold jumped 13. 6 percent to 321. 6 million, the highest since 1998, according to the Cigar Association of America, a Washington-based trade group.

It was after the apex of the 1990 s cigar boom, however, that the flow of fake cigars grew to what Altadis considered unacceptable levels.

"It got to the point where I just couldn't take it anymore," Folz said.

The company found that cigar piracy was a low priority for law enforcement. So, it hired its own private investigators to track down leads and put lawyers in charge of building cases to present to police for enforcement.

The company now annually spends in the "low seven figures" on rooting out the counterfeiters, educating retailers about the fakes, and training customs officers to recognize them, Folz said. It's money he thinks is well spent.

"We've spent generations developing products, developing brands, developing image with the consumer," he said. "We have a lot invested here."

Some of the world's most prized and pricey brands are those that originated in Cuba. Many, such as Montecristo, Romeo y Julieta and H. Upmann, are today owned by companies such as Altadis, which hand-rolls them for the U. S. market - not in Cuba, but in the Dominican Republic. The American trade embargo prohibits the sale of Cuban cigars in the United States.

In the late ' 90 s, Altadis USA bought the trademark rights from Cuba's exiled cigar-baron families whose companies were nationalized after the 1959 Cuban Revolution.

Altadis USA's Spanish parent company, also called Altadis, sells genuine Cuban cigars in Europe.

Because the cigars with Cuban pedigrees have such cachet, plenty of people want to copy them. Altadis is not the only cigar maker whose brands fall victim to counterfeiters, but it's been one of the most aggressive in battling bogus brands.

Contraband Havanas have been around for a long time. Some are the made-in-Cuba article smuggled into the United States in violation of the trade embargo.

Many of the fakes are rolled in South Florida, while others - often considered cheap and malodorous - are made in Central America and the Caribbean. All are packaged to pass as their tonier Cuban-name cousins.

The financial impact of the impostor cigars on the industry is hard to gauge with any certainty, but it appears to be swiping a chunk of legitimate cigar sales.

In 2002, Altadis nabbed a small Miami cigar shop where fake-cigar invoices totaling $ 60, 000 were found.

And Folz noted that December's raid netted enough counterfeit packaging materials for 30 million to 50 million cigars - at least 10 percent of those sold in 2005.

"The magnitude of it has really surprised everybody," said Norman Sharp, president of the Cigar Association of America. "I don't think anyone understood that."

The company itself didn't realize the extent of the counterfeit trade until Dec. 15, when police raided nine counterfeiting operations around Miami.

Altadis had rented two 25-foot trucks to cart away the fake merchandise but had to swap those for an 18-wheeler when police found the stockpiles of boxes, printing presses and cigars, some moldy and crumbling.

"Even then, we couldn't take every single thing away," said Chuck Grimes, the lawyer who heads Altadis' investigations. Now, Folz said, the company knows its work has just begun.

"You can go to almost every major city in the U. S. and find fake Cuban cigars," he said. "We're going to get more active."


Source: Arkansas Democrat Gazette