Beware of cigar imposters

Beware of cigar imposters
By Doreen Hemlock
South Florida Sun-Sentinel

April 9, 2006

A woman strolls along a tourist strip with a wooden cigarette box slung
around her neck, bright lights flashing on baubles for sale. A tourist
asks for Cuban cigars, and she offers an assortment of brands:
Montecristo, Romeo y Julieta, Cohiba and more -- each for less than $20.

"But how do I know this is really a Cuban?" the customer asks.

"Look at the label," she says, holding out a sample. "It says, `Habana,
Cuba.'"

Sounds authentic, but it's not. The beachfront encounter epitomizes what
many call an explosion of cigar counterfeiting, with South Florida as
its epicenter.

For starters, cigars "Made in Cuba" can't be sold legally in the United
States because of the four-decade-old U.S. embargo against the
communist-led island. And those purporting to come from the island with
names like Montecristo violate the trademark rights of U.S. companies
allowed to sell those brands when they're made outside Cuba.

Fort Lauderdale-based Altadis USA, reputedly the world's largest cigar
maker, is smoking mad about the rampant trademark violations.

The company is cracking down with help from informants, as well as
local, state, and federal authorities, to nab pirates who prey on its
brands. In December, it worked with Miami-Dade police in nabbing eight
people, seizing truckloads of cigar boxes, labels and other
paraphernalia for counterfeiting. Last month, a grand jury indicted five
of those eight on federal charges that carry stiffer penalties -- up to
10 years in jail and $2 million in fines for trafficking in counterfeit
goods.

Altadis also worked with the Broward Sheriff's Office on arrests of Fort
Lauderdale men for selling counterfeits at their stores: Smoke Café and
Carolina Cigar Co. And it's now targeting Internet stores that sell
copies of its brands, with more charges expected later, Folz said.

There's big money at stake, though no one knows exactly how much.
Altadis USA alone sells about $700 million a year in cigars, mostly in
the United States. And it spends "in the seven figures each year" just
on lawyers, investigators and other outside fees to protect its brands,
Chief Executive Theo Folz said.

Industry executives estimate the losses to counterfeit cigars could run
into the hundreds of millions a year -- not just in the United States,
but also in the Dominican Republic, Honduras, Nicaragua and other
nations known for cigar-making and where copies are common.

But South Florida stands out as a center for counterfeits, because of
its ample supply of Cuban and Latin American immigrants familiar with
cigar-making, as well as a strong tourism industry that brings many to
South Beach looking for the flavor of the Spanish Caribbean.

Joey Bevilacqua, who owns seven cigar stores on Miami Beach, said not a
day goes by when visitors don't ask for Cuban cigars in his shop.

"I'd say 40 percent of people who walk in ask for a Cuban, and they know
they're in the United States," he said, shaking his head. "They say,
`Oh, c'mon I know you've got 'em under the counter.'"

Bevilacqua knows he could lose his prized status as a seller of
top-of-the-line brands if he sold cigars made in Cuba or other
counterfeits of the top brands. His Deco Drive Cigar store is just one
of less than 200 across the United States authorized to sell Davidoff's
elite White Label line, with cigars that retail for $30 each.

Yet he grapples daily with the street peddlers near his shops who
purport to sell Cuban cigars and the frequent question that sends his
blood boiling:

"`I just bought this Cuban on the street for $25. Is it real?' they'll
say," Bevilacqua said. "And if it's a crappy cigar, they think we're
affiliated with the girls, and we're not."

Repeated complaints to Miami Beach authorities have not helped,
Bevilacqua said.

Folz and others familiar with the industry said counterfeiting in cigars
has exploded in recent years for various reasons, including technology.

Careful buyers

With digital printers of high quality and reasonable price, it's easier
now to copy labels, rings and other printed materials for cigars, Folz said.

The cigar sales boom and bust of the late 1990s resulted in many
unemployed cigar makers. Some idle hands turned to fakes -- where profit
margins were high, said Chuck Grimes, a lawyer representing Altadis USA,
with Grimes & Battersby LLP in Norwalk, Conn.

"They take what costs them pennies and sell it for dollars," Grimes
said. "But it's not a victimless crime. The consumer is getting ripped
off. And if customers have a bad experience, they blame the trademark
owner, and say, `Oh, these Montecristos have really fallen off, I'm not
going to buy them anymore.' And the government loses tax revenues, too."

To guard against fakes, many retailers say they're careful where they buy.

Paul Scarpelli, owner of PS Cigar Inc. in Boca Raton, said he buys
directly from reputable manufacturers such as Altadis, eschewing
wholesalers.

Even so, he's exposed to counterfeits from clients who have been
hoodwinked elsewhere. Scarpelli recalls a time when someone came in with
a box of "Cubans" purchased on the Internet for $250, which turned out
to be wrapped pipe tobacco. Another time, a guy showed up with "Cubans"
wrapped in the wrong label.

"I have no idea what these people are thinking. I guess it's the
mystique of getting something they can't get," Scarpelli said. "Many of
Cuba's good growers and rollers have defected, and they're in the
Dominican Republic, Nicaragua and Honduras. The Cuban crop isn't as good
as it used to be."

Manufacturers say they're reacting by adding new features to their
packaging that are tougher to replicate.

After finding fake boxes of its Nicaraguan-made brands in Central
American resorts, Nick's Cigar Co. of Miami asked its German supplier to
engrave the company logo on the metal hinges and clasps it uses on
boxes. The metal parts now boast a "P" surrounded by a circle, said
company President Nick Perdomo Jr.

The company also has its quality control inspectors burn their ID number
into the bottom of each cigar box, "although counterfeiters can copy
that," Perdomo conceded.

Even the federal government is joining the anti-piracy fight to help
brands in all industries -- from handbags to DVDs and watches.

A law signed March 16 widens the definition of counterfeiting to include
packaging materials not yet attached to a product, instead of just the
item itself. In the case of cigars, the change means stiffer penalties
for cigar boxes, rings, stamps and other items related to counterfeiting
-- even if there's no cigar.

It also means that people convicted of counterfeiting may be liable to
compensate the trademark owner and forfeit goods bought with gains from
counterfeiting. "The word on the street had been that all you'd get is a
slap on the hand (for cigar-related counterfeiting)," said attorney
Leora Herrmann of Miami-based Kluger Peretz Kaplan & Berlin P.L., which
also represents Altadis USA.

However, the allure of smoking a forbidden Cuban cigar -- while near a
palm tree on a South Florida beach -- holds such strong sway, no one
expects counterfeits to go away.

"It's so hard to police," said cigar maker Perdomo. "People like the
finer things in life, and counterfeiters will copy anything that's
profitable."

Doreen Hemlock can be reached at dhemlock@sun-sentinel.com or 305-810-5009.

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