Tobacco Firms Save $1 Billion with Kitty Litter in Cigars

A dozen tobacco companies have gained from a legal loophole that helped them avoid as much as $1.1 billion in U.S. taxes. Their secret: Using fillers such as the clay found in cat litter or stuffing the products with more tobacco to tip the scales in their favor. The heavier weight let the companies sidestep a 2,653 percent increase in a federal excise tax, taking advantage of a 2009 law that spared so-called big cigars. There were 22 companies producing small cigars in the year before the law created the new tax structure, according to data from the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau. Twelve of those companies, none of which the government would name, either switched to or increased production of large cigars in the year following the law, the bureau found. “It shows what length the tobacco companies will go to avoid taxes and regulation that were designed to improve public health without regard to their customers,” Danny McGoldrick, vice president of research at the Campaign for Tobacco Free Kids in Washington, said in a telephone interview. “They should equalize the tax to stop the shenanigans.” The practice has contributed to a doubling in sales of the weightier tobacco products and slowed a decade-long decline in tobacco use. The Centers for Disease Control and Prevention in an Aug. 2 report blamed sharp increases in adult consumption of pipe tobacco and cigarette-like cigars since 2008 on the 2009 law “that created tax disparities between product types.” Durbin Legislation The Government Accountability Office estimated in an April report that “market shifts from roll-your-own to pipe tobacco and from small to large cigars reduced federal revenue by a range of” $615 million to $1.1 billion from April 2009 through September 2011. U.S. Senator Dick Durbin, an Illinois Democrat, introduced legislation Jan. 31 to close the loophole. The bill would equalize the tax structure so there wouldn’t be an incentive to manipulate products, generating $3.6 billion in new tax revenue over 10 years, Christina Mulka, a spokeswoman, said by e-mail. The loophole appears to have mainly benefited smaller tobacco companies. Reynolds American Inc. (RAI), the second-biggest U.S. tobacco company, doesn’t operate in that market, David Howard, a spokesman for the Winston Salem, North Carolina-based company, said in an e-mail. Altria Group Inc. (MO), the largest seller of tobacco in the U.S., said its John Middleton Co. unit had already been selling large cigars with its Black & Mild line before the change in the law. The company didn’t have to make any shifts in how it formulates the cigars, which mostly are wood or plastic tipped and come as singles or in packs of two or five, David Sylvia, a spokesman for Richmond, Virginia-based Altria, said by phone. Customer Demand Prime Time International Co., a closely held tobacco company, sells some of its large cigars and flavored cigars in 20-count packs, similar to regular cigarettes. Closely held Cheyenne International LLC, based in Grover, North Carolina, also specializes in smaller-sized cigars that have a similar look and design of cigarettes. Jack Wertheim, chairman of Phoenix-based Prime Time, said shifts into the “large” cigar market are about responding to customer demands. The company sells large and small cigars to satisfy customers who prioritize taste and quality and appease those who want a lower-priced product, he said. Prime Time isn’t saving on taxes, and any savings would be passed to the customer, Wertheim said. Current rules require a rolled tobacco product to weigh at least 3 pounds per 1,000 to be labeled as a “large” or “premium” cigar, a category where taxes increased just 155 percent. Nothing Illegal The Treasury Department said tobacco companies aren’t doing anything illegal by making their products heavier. “If you meet the definition of a large cigar, then you’re a large cigar,” Thomas Hogue, a spokesman for the tobacco bureau, said in a telephone interview. “There’s nothing in the Internal Revenue code that goes after the specifics on how that weight is achieved.” Hogue wouldn’t provide the names of the tobacco makers switching to heavier products. Cheyenne was found to make two kinds of cigars that look like cigarettes yet weigh enough to be taxed as big cigars. One of the two has a regular fiber filter; the other has filters made of white fiber cylinders surrounding a granular clay substance. X-Ray Tests Jim Pankow, a chemistry professor at Portland State University in Oregon, published the first measurements of how addictive nicotine is when delivered by tobacco smoke. He agreed to conduct X-ray diffraction tests on the weightier Cheyenne product on behalf of Bloomberg News and found the clay filters were made of sepiolite. The weighty mineral is used for absorption in waste treatment, industrial cleaners and pet litters, according to the European Industrial Minerals Association. “They’re making products that are classified as cigars that are designed almost exactly like cigarettes,” Pankow said in a telephone interview. The vast majority of Cheyenne’s cigars that are considered large began marketing in 2007, said Marc Scheineson, a partner at Alston & Bird LLP in Washington who is regulatory counsel for the tobacco company. He didn’t say when the company’s heavyweights hit shelves. He said less than 3 percent of the company’s sales come from little cigars and heavyweights. The Alcohol and Tobacco Tax and Trade Bureau reviewed Cheyenne’s products to determine which excise class they fit in, he said. “You can look at this as a loophole or tax planning or a way to perpetuate job growth or small business continuity,” Scheineson said in a telephone interview. Filter Choice British American Tobacco Plc (BATS)’s Kent cigarettes used a similar micronite filter at one point. The London-based company said it moved the cigarettes to charcoal filters long ago. “The decision regarding whether to use charcoal or micronite filters is simply down to taste and currently, charcoal filters are used in Kent cigarettes in the vast majority of international markets where the product is sold,” Will Hill, a spokesman for the company, said in an e-mail. Filtrona Plc (FLTR), a maker of cigarette and cigar filters, said its sepiolite-based Cavitec Flavour product is one of many specialty filter types. Altogether they represent about 17 percent of the Milton Keynes, U.K.-based company’s total filter sales globally, Melanie Hulbert, a spokeswoman, said in an e- mail. Filtrona wouldn’t reveal its customers’ names, citing confidentiality agreements. FDA Oversight In addition to avoiding some taxes, cigars also sidestep a ban on flavored cigarettes. Cheyenne’s heavyweight products come in wild cherry flavor, while their other cigars can be bought in flavors such as grape and vanilla. The result is that while cigarette smoking -- the leading preventable cause of death in the U.S. -- continued an 11-year downward trend, large cigar smoking tripled from 2000 to 2011 and loose tobacco pipe smoking has jumped almost sixfold, the CDC said last year in a report. Sales of large cigars more than doubled to 1 billion units a month in September 2011, from 411 million when the law took effect in January 2009, the GAO said. At the same time, small cigar sales dropped to 60 million from 430 million. The FDA, which was given the authority by Congress in 2009 to regulate tobacco, primarily cigarettes, is now looking to broaden its rules. The agency is “moving as expeditiously as possible to release for public comment a proposed rule to regulate additional categories of tobacco products,” Jennifer Haliski, an agency spokeswoman, said in an e-mail. The FDA is scheduled to release a proposed rule by April, the federal Office of Management and Budget, which oversees all regulation development, said on its website. Source: http://www.bloomberg.com/news/2013-03-01/tobacco-firms-save-1-billion-with-kitty-litter-in-cigars.html

Pitt sent packing for Tobacco Road

There isn't much time to reflect and contemplate the deep meaning of anything when you're a basketball coach. There is always another opponent to beat, another recruit to woo. And so as Jamie Dixon walked onto the Madison Square Garden floor for the last time as a member of the Big East Conference, he wasn't teary-eyed or filled with nostalgia. He was worried about Syracuse. And when it was over, when the Orange claimed the 62-59 victory to officially send the Panthers packing for the ACC, Dixon didn't pause or take in the sights. He didn't gaze into the darkness of the stands or even turn around. He walked over, shook Jim Boeheim's hand and kept going on to the next thing: the NCAA tournament. "You don’t really have time to sit back, especially during it," Dixon said. "Maybe at some point afterwards." At least as Pitt leaves Broadway for Tobacco Road, it can take comfort in the fact that it went out on its own terms: a typical bare-knuckle Big East brawl. Brandon Triche and James Southerlandboth walked into the post game interview room with ice bags on each knee; Dante Taylor got popped in the eye so badly during the game he was almost gushing blood onto his uniform; and there was one play where three guys lay sprawled underneath the hoop while Tray Wood all checked his eye for blood and Taylor held his knee. At which point you had to wonder if ACC officials were watching in Greensboro, N.C., and wondering, "What have we gotten ourselves into?" "I think that’s why this has been the best league and games like this typifies that," Dixon said. "I’m really proud of how our guys kept battling. That shows something, too. In our league, teams get down and keep battling. That’s been pretty consistent throughout the league." To that point, the Panthers came back from a 13-point halftime deficit and a 10-point second-half hole, with the ball and a chance to tie it with 28 seconds left. Instead Michael Carter-Williams stepped in front of a pass from James Robinson, drove down the court and wisely held on to the ball, forcing the Panthers to foul him. The sophomore recently tabbed the most improved player in the conference showed the progression he has made this season. The same guy who went 7-for-15 in this building against Temple in December drained the free throws, knocking down four in the final minute, to seal the victory. "He’s worked hard at it," Boeheim said. "Sometimes you have to go through those bad experiences to be able to come back in this situation and be able to make them. And they were huge. I mean, I don’t think we win if he doesn't go to the line and hit those free throws." Pitt’s exodus doesn't conjure up the same sort of sentiment that Syracuse’s will, whenever that comes. Still the Panthers have more than made their mark on the Big East. Pitt advanced to the tournament title game in seven of the past 12 years and won the whole thing in both 2003 and 2008. Dixon culled plenty of talent from New York, giving his team both local flavor and fan appreciation. Mix in the Panthers’ style under him and his predecessor Ben Howland -- gritty, scrappy, occasionally ugly offensively and never apologetic -- and Pitt fit right in with the image of a league that once got so physical it went to six fouls. "It’s sad we had to go out this way," Lamar Patterson said. "But I had fun playing in the Big East." Fun, of course, is in the eye of the beholder, and for Pittsburgh Big East fun was always a basketball game that looked like a street fight. Source: HTTP://ESPN.GO.COM/BLOG/COLLEGEBASKETBALLNATION/POST/_/ID/79280/RAPID-REACTION-SYRACUSE-62-PITTSBURGH-59

A Billion Deaths from Tobacco Are a Key Obstacle to Global Development

If the world's nations are going to prevent tobacco smoking from causing one projected billion deaths by the end of this century, they must: Make tobacco control part of the agendas of United Nation's and other development agencies worldwide; Assure every sector of a nation including health, trade and finance officials work collectively to protect not only health but the harm tobacco places on their economy by passing laws to reduce use; Place health as the centerpiece of any decision on a trade treaty that includes tobacco; Diligently work toward a goal of reducing the prevalence rate of smoking to less than five percent world-wide by 2048, basically ending its use. Those were among the key recommendations to come out of an international gathering last week at Harvard University of public health officials, academics, and public health advocates from more 40 nations, and such international organizations as the European Union, the African Union, the World Trade Union, and the World Health Organization. "The only entity in the world to benefit if tobacco use is passed down to the next generation of poor children of the world will be the tobacco industry," warned Gregory Connolly, chair of the meeting and director of the Center for Global Tobacco Control at the Harvard School of Public Health (HSPH). Harvard School of Public Health. "All other industries producing good products and services will suffer, not benefit, and the same is true for the economies of poor nations and their citizens," if smoking is not snuffed out. This meeting was an historic step to make global smoking history," said who two decades ago crafted Massachusetts's tobacco control efforts. And Dr. Douglas Webb of United Nations Development Program warned that "tobacco use poses a major health and human development threat. Avoidable and unnecessary, tobacco-linked illnesses strike people in their prime, hit the poorest hardest, inhibit country productivity, burden already weak healthcare systems, and consume scarce national resources." Sponsors of the unusual two-day conference on "Governance of Tobacco in the 21st Century," at Harvard's Radcliffe Institute for Advanced Studies, included WHO, the Harvard Global Health Institute, the American Cancer Society, and the Institute of Global Tobacco Control, at Johns Hopkins University. Meeting attendees were warned by speaker after speaker that unless there is a concerted international effort now, the plague of tobacco smoking that has claimed 100 million lives in the Developed Nations, will claim a billion in the Developing Nations, where smoking has yet to take hold as it did during the last century in the U.S. and other Developed nations. But though the situation was described as dire, many nations present showed unity in passing tough national laws based on the World Health Organization Framework Convention on Tobacco Control (FCTC) and demonstrated clear evidence of the scientific effectiveness of the FCTC in reducing use. • Dimitry Yanin of Russia announced that Russian President Vladimir Putin banned smoking in all public places beginning this past June 2013. The legislation will also restrict cigarette sales and ban advertising and sponsorship of events by tobacco companies; • H.E. Nicola Roxon, MP, and Former Attorney General and Minister of Health of Australia, reminded delegates to the that the Australian Supreme Court recently upheld legislation requiring plain pack cigarette packaging; • Dr. Eduardo Bianco of Uruguay presented data on the sharp decline in smoking through the adoption of comprehensive tobacco control measures recommended by the WHO. The decline in Uruguay is comparable to that seen a decade ago in Massachusetts, where smoking is now a rarity, said MIT professor Jeffry Harris, who has evaluated both programs; • Dr. Debby Sy, of the Philippines presented data on that nation's recent successful efforts to greatly increase taxes on tobacco products, despite intense opposition from multi-national tobacco companies; • And Dr. Bernard Merkel of the European Union described the EU's new proposed directive that would allow EU nations to adopt plain packaging, high taxation, smoke-free public places and proven measures. Other sponsors of the meeting included the American Legacy Foundation, the World Health Organization, the International Development Research Centre, the Medical University of South Carolina, the International Tobacco Control Policy Evaluation Project, at the University of Waterloo, the O'Neill Institute for National and Global Health Law, at Georgetown University, the Framework Convention Alliance of Action on Smoking and Health, the Campaign for Tobacco-Free Kids, and the Southeast Asia Tobacco Alliance. http://www.eurekalert.org/pub_releases/2013-03/hu-abd030413.php

Big Guns Take Aim at Big Tobacco

South African physician and former cabinet minister Nkosazana Dlamini-Zuma has been at the center of the fight to stop the spread of tobacco on her continent. Young teens in poor countries often buy cigarettes one at a time because they can’t afford a whole package. But that’s still enough to foster an addiction. South African physician and former cabinet minister Nkosazana Dlamini-Zuma saw this as a major problem in her country, and it dawned on her: create a law requiring cigarettes to be sold in packs. “If [children] have to make a choice in the end between buying a DVD or going to the movies or buying tobacco, and tobacco is too expensive, they will dump it and go on to other things,” said Dlamini-Zuma, a guest speaker at this week’s “Governance of Tobacco in the 21st Century” conference, sponsored by Harvard School of Public Health (HSPH) and the World Health Organization (WHO).

The two-day conference, held at the Radcliffe Institute for Advanced Study, brought together global experts in public health, law, trade, and agriculture to address the public-health threat of increased tobacco use in undeveloped nations. In all, some 250 registrants from 35 countries convened to discuss a long list of steps to oppose major tobacco companies that market aggressively in undeveloped nations. Smoking is on the decline in the developed world, but it is increasing rapidly in underdeveloped nations, where national and international tobacco companies have increased their marketing efforts, experts said. Today, about 900 million smokers live in developing nations, accounting for 70 percent of the global consumption of tobacco. Tobacco use is projected to cause 8.4 million deaths by 2020, and based on consumption patterns, the majority of those deaths likewise will occur in developing countries. John Seffrin, CEO of the American Cancer Society, another conference speaker, called tobacco use the leading cause of premature death in the United States and the single most preventable cause of illness and premature death globally. “Tobacco killed 100 million people last century and it’s on course to kill a billion this century,” he said. “It’s an unprecedented carnage on human life. And if that isn’t bad enough, we have a highly profitable industry making sure that it happens.”

Dlamini-Zuma, chairperson of the African Union Commission, has been at the center of the fight to stop the spread of tobacco on her continent, pioneering legislation to stop tobacco sports-sponsorships, passing a groundbreaking law making it illegal to smoke in public places, and even asking South Africa’s deputy president to stop smoking his pipe in public. “Tobacco companies are working very to hard to make sure that what they lose in developed countries they gain in undeveloped ones,” Dlamini-Zuma said. “They are targeting the young, and also women.” It is “strong leaders” like Dlamini-Zuma, said Matthew Myers—who runs The Campaign for Tobacco-Free Kids, a nonprofit that advocates policies to keep children from smoking—who are going to make the difference in fighting “Big Tobacco” at the highest level of government. Tobacco is not primarily a problem that is going to be solved in our medical healthcare systems, he added, but a problem of political will and social-norm change.

“We have a good news story, which is we know how to reduce tobacco use…we have no excuse for not succeeding, because we have models of success,” he said. “Raising the tobacco tax not only saves lives, but—where a small portion of that money is dedicated to reducing tobacco use and helping people avoid disease—we are able to sustain those programs not for one day, not for the limited period of donor interest or global funds, but on an ongoing and continuous basis.” Although WHO director-general Margaret Chan praised recent developments in Russia, where President Vladimir Putin has proposed tough new tobacco legislation, and in Japan, where the government has sold some of its tobacco holdings, she also warned of a dark future if there is no immediate action. During the past 10 years, she said, smoking has decreased by about 10 percent in wealthy countries, but increased by around 18 percent in the developing world. She added: “Deadly products are being dumped on the poor.”

Chan also pointed out what she feels could be the most efficient way to control the spread of tobacco use: the Framework Convention on Tobacco Control (FCTC), adopted by the United Nations in 2005. Agreement on the treaty was “a milestone for public health, as it created international legal obligations to regulate tobacco,” she explained, adding that FCTC marked the first global treaty to regulate the marketing and trading of a product of mass consumption. “For a long time, the public-health community was, in effect, trying to topple a giant with a slingshot, relying largely on warnings about the health hazards of tobacco use, communicated in public-information campaigns,” Chan said. “In contrast, the treaty brought out the big gun. We need a big gun for Big Tobacco.”

Source: http://harvardmagazine.com/2013/03/big-guns-for-big-tobacco