Published: July 15, 2009 12:28 pm      

Contraband cigarettes snuffed out in Indiana

Half of inventory destroyed, half shipped out of state under agreement

More than 11 million cigarettes that were warehoused in Indiana illegally are being eliminated under an agreement between the State of Indiana and the cigarette distributor. Half will be destroyed and half were taken out of state Monday.

This action resolves a case brought by the Indiana Attorney General’s Office against distributor G.T. Northeast Inc. of Sellersburg, over 55,039 cartons of “unstamped” or contraband cigarettes seized from its warehouse.

“Storing these contraband cigarettes in Indiana violated the Master Settlement Agreement that the tobacco industry signed when it agreed to change its marketing tactics,” Indiana Attorney General Greg Zoeller said. “Fortunately, this particular distributor cooperated with the investigation, owned up to its mistake and has agreed to a fair resolution to the case.”

“Our hope is that other distributors throughout the state are operating in accordance with the law,” said Revenue Commissioner John Eckart. “Our compliance efforts will certainly help to ensure that is the case.”

When investigators for the Indiana Department of Revenue conducting an audit inspected G.T. Northeast’s warehouse in September 2007, they found that approximately 12 percent of the inventory included six brands prohibited for sale in Indiana. A total 55,039 cartons — 555,390 packs or 11,007,800 cigarettes — were seized as contraband and have been stored since then.

Under the terms of the Master Settlement Agreement negotiated a decade ago by Indiana and 45 other states and the tobacco industry, only those cigarette brands listed with the Indiana Attorney General’s Office may be stored or sold within state lines.

The attorney general’s office, representing the Indiana Department of Revenue, sought an injunction against G.T. Northeast in Clark County in June 2008 for violating state statute. Beyond the seized inventory, sales records indicated that G.T. Northeast had previously sold $2,334,000 million in contraband cigarettes between January 2006 and August 2007.

A consent agreement reached between the attorney general’s office and G.T. Northeast notes that the company mistakenly interpreted the law to permit the storage of the cigarettes in Indiana since they were to be sold elsewhere. Possession of contraband cigarette brands is illegal in Indiana, even if stored in Indiana for sale outside the state.

Under terms of the consent agreement, the state will destroy half the seized inventory. G.T. Northeast transported the other half across the state line into Kentucky today, followed the entire way by investigators from the attorney general’s tax division who verified the removal occurred.