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Cigarette Kickbacks are Burning Small Distributors

02/26/2018 | New York Post
By John Crudele

Here’s a tip: When you are giving a kickback to someone, make very sure that person isn’t part of a sting operation.

This probably has never come up in your life — but you never know.

The salesmen who fill New York’s candy stores with tobacco and sweets probably never thought this would apply to them either. Otherwise, they now wouldn’t be in the middle of a lawsuit that could hurt their companies.

The suit was filed last week in Brooklyn state court by several small New York distributors of cigarettes and other candy store items — Amsterdam Tobacco, Donohue Candy, Kingston Candy, Mountain Candy and Sunrise Candy — claiming that bigger out-of-state distributors for years have been allegedly giving kickbacks to stores that buy cigarettes from them.

The smaller distributors say they can't compete with allegedly crooked rivals. The suit, which was filed by Randall Fox of Kirby McInerney, says the kickbacks are illegal because the state has what is called a fair trade law that sets the minimum price for cigarettes.

The suit says that by allegedly rebating $1 or $2 a carton, the out-of-state distributors are breaking the law. Fox, in the suit, claims the rebates first started out as envelopes of cash handed back to the retailers.

The defendants then began giving their customers credits against their bills for returned products and damaged products, court papers claim.

The suit says that often nothing was returned and nothing was damaged.
The out-of-state distributors haven't replied yet to the suit.

The companies named in the suit are some of the biggest distributors in the country: Harold Levinson Associates, Core-Mark Midcontinent, McLane, Resnick Distributors and J. Polep Distribution Services.

The smaller distributors bringing the suit had a team of investigators pretend to be opening seven gas stations with convenience stores attached.

And, the suit alleges, they discussed rebates with the distributors.

The stings were taped, and I have a copy of the transcripts. Very interesting — especially if what the defendants are alleged to have done in New York for many years was also being done in the 26 other states with laws on pricing cigarettes.

And with tax season approaching, it would also be interesting to know if the recipients of those rebates — the stores that sell you cigarettes and stuff — are going to claim on their taxes the money they allegedly got back under the table.