CHARLESTON – West Virginia Attorney General Darrell McGraw has filed a lawsuit against a Chinese cigarette manufacturer, claiming the company owes the state as much as $420,000 for not establishing an escrow account for the state.
In the suit filed Dec. 12 in Kanawha Circuit Court, McGraw says Changde Cigarette Factory, which is located in Changde City in China's Hunan Province, sold at least 220,000 units of the Columbus brand of cigarettes in West Virginia in 2002 and at least 6,992,800 units of Columbus in the state in 2003. Those numbers, the suit says, are measured by wholesale reports provided to the state.
The suit claims Changde is not registered to do business in West Virginia and does not have a registered agent for service of process. Still, Changde has contractd to sell, has sold and has profited from the sale of cigarettes in the state.
Thus, the suit says, Changde was required to place into a qualified escrow fund by April 15, 2003, an amount equal to $.0136125 adjusted for inflation per unit of individual cigarettes sold in the state in 2002 and, by April 15, 2004, an amount equal to $.0167539 adjusted for cigarettes sold in 2003.
Changde, the suit alleges, has not done that. The final amounts that should have been placed in escrow funds were $3,383.28 for those cigarettes sold in 2002 and $136,32673 for those sold in 2003.
Citing state code, the suit says such a company knowingly committing a violation must pay a civil penalty to the state's general revenue fund an amount not to exceed 15 percent of the amount improperly withheld from escrow per day of violation an in a total amount not to exceed 300 percent of the original amount.
Therefore, 300 percent of the 2002 sales is $10,149.84 and $408,980.19 for 2003 sales.
In the suit, the state seeks a judgment finding the defendant violated state code for not establishing and funding an escrow account; requiring the defendant to place the sum in an escrow account within 15 days of judgment; finding that violations were knowing violations and thus assessing civil penalties of 300 percent or, if the violations were not intentional, seeking civil penalties of 100 percent of the obligations; issuing an injunction keeping Changde from selling cigarettes in West Virginia for two years; as well as attorney fees, pre- and post-judgment interest, costs and fees of the action as well as other relief.
The suit requests a jury trial.
Kanawha Circuit Court case number: 05-C-2693