McGraw sues Brazilian tobacco company for $2.5 million in taxes

CHARLESTON - State Attorney General Darrell McGraw has filed a civil suit against a Brazilian tobacco company, claiming it has not paid more than $2 million in state taxes.

In a lawsuit filed March 2 in Kanawha Circuit Court, McGraw says Sudamax Industria E Commercio De Cigarros, a tobacco company based in San Paulo, has not paid escrow requirements to the state. Sudamax produced the Berkley brand of cigarettes.

"Sudamax was required to pay $736,593.88 in escrow on or before April 15, 2005, and required to pay $140,331,13 on or before April 15, 2006, but no funds were put in escrow," the suit says.

Tobacco manufacturers must meet certain obligations under West Virginia Code to be able to sell their product in the state. One way can be by entering into a master settlement agreement, which Sudamax did not enter. If the company does not enter into that agreement they must pay into a qualified escrow fund, in an amount equal to $.0167539 per pack of cigarettes sold in the state, which is adjustable with inflation.

The suit says Sudamax did not place any money in an escrow account from Jan. 1, 2004, to June 23, 2005.

"At least 36,591,880 packs of Berkley cigarettes were sold between Jan. 1 and Dec. 31, 2004, and 6,741,000 packs were sold between Jan. 1 and June 23, 2005," the suit says. "After June 23, Berkley brand cigarettes were removed from the Directory of Cigarette Brands Approved for Stamping and Sale in West Virginia for Nonparticipating Manufacturers."

According to the civil suit filed by McGraw, Sudamax was required to pay $736,593.88 in escrow on or before April 15, 2005 and required to pay $140,331,13 on or before April 15, 2006, but no funds were put in escrow.

"Pursuant to West Virginia Code ... the penalty for a knowing violation is a civil penalty to be paid to the state's general revenue fund in an amount not to exceed 15 percent of the amount improperly withheld from escrow per day of the violation and in a total amount not to exceed 300 percent of the original amount improperly withheld from escrow," the suit says.

The amount Sudamax owed exceeded 300 percent. McGraw seeks a court injunction that would make Sudamax pay $2,209,781.64 for 2004 and $420,993.39 for 2005, for violating West Virginia Code.

The case has been assigned to Judge Irene Berger.

Kanawha Circuit Court case number 07-C-374