Advertisement

Searching for Truth Behind the Smoke

What looks like a brazen case of corporate identity theft has Japan Tobacco battling shadowy Eastern European upstarts for rights to a cigarette brand

February 15, 2004|Myron Levin | Times Staff Writer

Gregor Macek could not have imagined the strange scenario that would unfold when his client Japan Tobacco International gave him his marching orders.

The lawyer was to check out a tip that a shipment of counterfeit Monte Carlo cigarettes, one of Japan Tobacco's big brands in Eastern Europe, was steaming toward the port of Koper on the Adriatic Sea. He raced to the docks from his home in Ljubljana, Slovenia, and discovered that 16 40-foot containers of the cigarettes already had come ashore.

When Macek implored customs agents to seize them, they refused. They were skeptical because the shipment bore none of the telltale signs of contraband. Rather than being hidden behind other goods and disguised by false shipping papers, the Monte Carlos weren't concealed or declared on customs forms as something else. Moreover, the cache had been consigned to a firm called Jay Tea International, or JTI -- presumably a branch of the global tobacco concern.

"We had some really hot discussions," Macek recalled. "I had to say to them, 'You have to trust me, I know that these ... containers are counterfeit.' " He finally persuaded a customs supervisor he reached by cellphone to give the order to impound the smokes.

The haul: nearly 140 million cigarettes, exceeding the largest seizures known to the World Customs Organization.

Follow-up investigations by Japan Tobacco revealed that hundreds of millions of knock-off Monte Carlos already were in the market. The mysterious JTI and its affiliates had procured cigarettes from factories in Greece, Bosnia-Herzegovina and Dubai, United Arab Emirates. They had obtained perfect copies of Monte Carlo packaging from a printer in Milan, Italy.

And they weren't content to just make the cigarettes look authentic. They also had contrived at least three "JTI" business names in the former Yugoslavia -- in effect, hijacking the identity of a global corporation, Japan Tobacco would claim.

The rival Monte Carlo purveyors say everything they have done is perfectly legal, although the matter is the subject of a criminal investigation.

The JTI affair underscores the growing importance of sophisticated counterfeiting rings in global cigarette smuggling, which has enriched criminal gangs and been used as a money-laundering vehicle by drug traffickers and terrorists, some authorities say.

Smuggling is deeply ingrained in the former Yugoslavia, where wartime sanctions and political corruption spawned a thriving trade in black-market goods.

Illegal tobacco sales have produced a windfall for organized crime and helped underwrite the territorial wars of Serbian strongman Slobodan Milosevic, according to testimony at his war crimes trial in The Hague. The region even has the dubious distinction of having a sitting leader, Montenegrin Prime Minister Milo Djukanovic, under criminal investigation in Italy for allegedly taking payoffs to help Mafia gangs funnel untaxed cigarettes into that country and Western Europe.

At the same time, counterfeits are a growing problem for tobacco companies as they try to shed their own baggage. Long accused of encouraging smuggling by deliberately oversupplying certain markets, cigarette makers have responded to legal pressure by cutting off some of their more dubious customers. Illegal traders have coped with shrinking stocks of genuine products by selling knockoff versions of famous brands.

Indeed, Japan Tobacco and its major rivals were busy chasing counterfeit rings at the time of the Koper bust. But they were unprepared for what looked like a brazen case of corporate identity theft.

Kent Brown, a Japan Tobacco vice president and former U.S. ambassador to the former Soviet republic of Georgia, called it "amazing and ridiculous." Then again, it shouldn't be a surprise, he said, "that these things happen in this part of the world."

With help from a disgruntled lawyer who once worked for Japan Tobacco, the people behind the JTI sound-alikes had persuaded the federal Intellectual Property Office in Belgrade to declare them owners of the Monte Carlo trademark.

The decision came May 17, 2002 -- the day before Macek reached Koper -- though Japan Tobacco only got wind of it later. It turned out that Japan Tobacco's rivals had begun procuring Monte Carlo packaging and cigarettes months before gaining the legal imprimatur of the trademark office.

A legal battle quickly ensued. Some 20 lawsuits have been filed in at least four countries, and a criminal investigation of the circumstances surrounding the trademark ruling is underway in Belgrade.

If upheld, the Monte Carlo trademark ruling would give the sound-alikes control of a popular brand in the smokers' paradise of Serbia and Montenegro, as the former Yugoslavia now is called. These Monte Carlos also could leak across borders through exports, legal or otherwise, costing Japan Tobacco sales in other countries.

Claim of Coincidence

Advertisement
Los Angeles Times Articles
|
|
|