Lucio Tan's firm in Saipan sued for tax cheating

Saipan Tribune August 31, 2005

Local
Wednesday, August 31, 2005

Another RP tobacco firm sued

By John RaveloReporter

The CNMI government yesterday sued another Philippine tobacco company for allegedly failing to comply with the Commonwealth's Tobacco Escrow law, asking the Superior Court to declare the firm's liability at over $2 million.

CNMI consumer counsel Brian Caldwell filed the civil action against Fortune Tobacco Corp., a Philippine-based firm controlled by business tycoon Lucio Tan. Caldwell had earlier filed a similar lawsuit against Philippine company La Suerte Cigar & Cigarette Factory.

Caldwell said the company has failed to meet certain obligations required by Public Law 13-15, which requires tobacco manufacturers selling products in the Commonwealth to deposit a certain amount into the CNMI's tobacco escrow fund by April 15 of the year following the year when it sold products locally.

Caldwell said Fortune sold cigarettes in the Commonwealth-whether directly or through a distributor, retailer or other intermediary-from 2001 to 2005. Those cigarette brands include Hope Luxury and Champion.

The complaint did not specify the number of cigarettes sold in 2001 and 2002, but Caldwell said sales reached some 13,700,000 units in 2003 and some 10,500,000 in 2004.

The law provides a formula to compute the amount a manufacturer is supposed to deposit in escrow, which is proportionate to its sales. For 2003 and 2004's sales, Caldwell said Fortune should deposit in escrow at least $267,085.61 and $211,364.83, respectively, for a total amount of $478,450.44.

Caldwell said Fortune should be held liable for the same amounts in civil penalties, assuming that violations of the tobacco escrow law were not willful. Willful violations, however, entail civil penalties of at least $801,256.83 and $634,094.49, respectively, for a total of $1,435,351.32.

Fortune has already stopped exporting cigarettes to the Commonwealth. It contested the CNMI's demand to deposit certain amounts in escrow, saying that the tobacco escrow law was passed after its cigarettes were shipped out of Manila.

“We like to think that the cited laws do not have retroactive effect,” stated Eduardo Ceniza, general counsel for the Lucio Tan Group of Companies, in a Sept. 8, 2004 letter to Caldwell.

“The volume of cigarette products that Fortune Tobacco Corp. has been selling to dealer in the Mariana Islands is relatively small. The cost for putting up the escrow fund as required by your law will make it unprofitable for Fortune Tobacco to continue exporting its cigarette products to the Mariana Islands,” Ceniza said.

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(You see? Tax cheating is in his blood! Even in a territory of Uncle Sam, nakaw pa rin si Yellow Economic Lucifer!)