| John Olin General Counsel DHL International 1200 South Pine Island Road Plantation, FL 33324 |
Wednesday, March 9, 2005 |
Dear Mr. Olin:
RE: Notice of Potential Legal Liability for Facilitation of Illegal Internet Sales of Cigarettes
Made in Violation of Any One or More of Five Different Statutory Requirements
As the legal-action antismoking organization which initially suggested that Attorneys General could sue tobacco companies – suits which were originally regarded as frivolous, but which resulted in a $246 BILLION settlement – we write to advise your company of its potential legal liability related to the Internet sale of cigarettes, especially under the RICO statute.
More specifically – under several legal theories which have already been sustained in court and/or resulted in settlements – companies selling cigarettes on the Internet appear to be guilty of crimes and also may be civilly liable. Those who facilitate the illegal sales – e.g., by delivering them – may share in that liability as co-conspirators, accomplices, and/or accessories.
As no fewer than forty-four Attorneys General recently concluded in a letter sent by the National Association of Attorneys General [see, e.g., http://ash.org/AGltr, citations in brackets added, emphasis added]:
“Additionally, virtually all online tobacco retailers engage in illegal sales for at least one of the following reasons:
(1) they make no effort to verify the age of their customers, as required by state and local laws [See, e.g., http://slati.lungusa.org/ under “Youth Access”]
(2) they do not report shipments of cigarettes to the tobacco tax administrator of the state into which such shipments are made as required by 15 U.S.C. § 375 et seq. (‘the Jenkins Act’);
(3) they violate laws in certain states specifically regulating and/or prohibiting the sale of tobacco products over the Internet [See, e.g., Cal. Bus. & Prof. Code § 22963, and N.Y. CLS § 1399-ll];
(4) they violate state tax laws [See, e.g., http://slati.lungusa.org under “To-bacco Excise Tax”], and/or
(5) they utilize the Internet and the mail to complete illegal tobacco transactions, in violation of federal wire fraud and mail fraud statutes [18 U.S.C. § 1341 and 1343] .” Therefore, if your company provides delivery services for these purchases, or otherwise facilitates them, it may share in the potential legal liability, as well as the public embarrassment likely to result if the company is charged with such conduct after it has been put on notice by the Attorneys General of the illegality of the sales and its role as facilitator.
Please be advised, with regard to this issue:
* At least one court has upheld the legal theory under which states as well as municipalities may file suit for such violations under the Racketeering and Corrupt Organizations Act [RICO].
See, City of New York v. Cyco.Net Inc., reprinted at http://ash.org/internetsalescases.html.
* Several state law suits based upon online sales have resulted in favorable settlements. See, e.g., http://ash.org/internetsalescases.html.
* Several Attorneys General have met or are about to meet with credit card companies to urge them to review the legality of processing on-line cigarette purchases.
* PayPal has not only blocked Internet cigarette sales to customers in New York and California – which have laws which “prohibit or severely restrict the sale of tobacco over the Internet to residents in these states” – but also requires sellers to have “appropriate screening systems in place to prevent sales [of cigarettes] to California and New York residents.”
* Paypal also “requires sellers of tobacco to be prepared to show evidence that all necessary regulations are met, including but not limited to age verification requirements and payment of applicable sales and excise taxes.”
* MasterCard has reportedly begun blocking cigarette sales from certain Internet tobacco sites to customers in two states, and is actively reviewing the legality of credit card sales to customers in others.
* At least one Attorney General has urged postal officials and private carriers to stop delivering cigarettes bought online or face legal sanctions.
* Officials from the Federal Bureau of Alcohol, Tobacco, Firearms, and Explosives [BATFE] are meeting with credit card companies to explain how such sales can be illegal.
* Law enforcement officials have begun seizing cigarettes shipped illegally.
Your company has now been placed on notice by this letter [as well as the citations and links herein which are incorporated by reference and made a part of this document] that:
* In the judgment of at least 44 Attorneys General, “virtually all online tobacco retailers engage in illegal sales” of cigarettes;
* This judgement is shared by the BATFE as well as other governmental bodies;
* New York and California have laws which “prohibit or severely restrict the sale of tobacco over the Internet to residents in these states”;
* Other companies which facilitate such sales are taking steps to cease such facilitation and/or to prevent ongoing violations of law from continuing; * Many medical and health organizations agree that such sales are a major factor in tens of thousands of children annually becoming hooked on nicotine – and therefore likely to die, or suffer disability, as a consequence – as a result of illegal cigarette sales made over the Internet and facilitated by credit card companies.
Should your company continue to facilitate such illegal sales, and not take even the same simple steps other companies are beginning to take to stop facilitating these criminal acts, it is likely that your company will be named in legal actions seeking to impose liability as an accomplice, co-conspirator, or accessory to these crimes, or in some other capacity as defendant.
Indeed, since other companies have already taken positive steps to terminate their facilitation of these illegal Internet sales, courts may well adopt such conduct as an appropriate standard of care and a concession of the minimum duty owed under these circumstances.
As you know, juries are increasingly expressing their concern about the tactics used by tobacco companies to promote their products by returning multi-million and even billion dollar verdicts, and some appellate courts have been sustaining these verdicts. They do so even though the activities of the tobacco companies did not violate any criminal statutes, and although adults were the plaintiffs and the targets.
When companies such as yours actively facilitate the sale of tobacco products over the Internet, these activities apparently do violate criminal statutes and, in virtually all of the situations, children are either the targets or are substantially implicated as victims. Thus the potential anger of juries and concern of judges is likely to be even greater.
For all of these reasons, Action on Smoking and Health (ASH), a legal-action antismoking organization, strongly urges you to either discontinue facilitating the sale of cigarettes over the Internet, or to at least take positive steps to provide adequate assurance that any sales which you do facilitate are in full compliance with all of the laws cited herein.
ASH is in communication with the Attorneys General concerned about the problem, and will continue to urge them to take more effective action against those who turn a blind eye towards it. This organization is also considering what additional legal actions might be brought in addition to those already in the process of being brought by the Attorneys General.
Thank you for your consideration and cooperation.
Yours truly,
John F. Banzhaf III
Exec. Dir. & Chief Counsel
Action on Smoking and Health
(ASH)
701 4th St. NW / Washington, DC
20001 / (202) 659-4310
A national nonprofit, scientific and educational organization founded
in 1967.
All donations are fully tax deductible.