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N.J. Prevails In Lawsuit Against Out-of-state Tobacco Seller Red Jacket

In a decision issued by state Superior Court Judge Maria M. Sypek, Red Jacket and its owner, Lesley A. Hoag, were ordered to pay more than $760,000 in penalties, costs and fees requested by the state Division of Consumer Affairs and the state Division of Taxation.

The state government has prevailed on all counts of a lawsuit it filed a year ago charging New-York-based cigarette seller Red Jacket Tobacco with illegal business practices related to the advertising and sale, by mail order, of "tax free" cigarettes online in New Jersey, Attorney General Anne Milgram announced Monday.

Sypek found that Red Jacket violated state laws by selling cigarettes in New Jersey without a license, and by selling discount cigarettes not listed in the New Jersey Tobacco Manufacturer's Directory. "This is an important outcome for New Jersey consumers and taxpayers," Milgram said.

"Through our lawsuit, we have put a stop to cheap cigarettes sales practices that sought to evade taxation. We have also held Red Jacket accountable for deceiving New Jersey consumers with phony enticements for ‘tax free' product, and for selling tobacco by mail with no regard for whether buyers were of legal age."

In addition to finding that Red Jacket violated the law by selling Buy Cigarettes Online not on the directory, and by selling discount cigarettes in New Jersey without being licensed either as a tobacco distributor or wholesaler, the judge also found that Red Jacket violated the state's Consumer Fraud Act. Specifically, she found that Red Jacket sent New Jersey consumers 60,000 Money Mailer advertisements that contained misrepresentations.

Those misrepresentations included statements that the discount cigarettes offered for sale were "tax free" when, in fact, taxes are due on them. Red Jacket also advertised that, "If we don't have it, we can order it" when, by law, only online cigarettes in the directory can be sold in New Jersey.

In ruling in favor of the state on all five counts of its lawsuit, Sypek also found that Red Jacket engaged in unconscionable business practices including, but not limited to, selling cigarettes online without tax stamps and selling cigarettes online to a consumer without verifying that the consumer is at least 19 years of age.

The state's original lawsuit was filed on Oct. 10 following an undercover investigation by the Division of Consumer Affairs. On two occasions, an investigator purchased cigarettes online from Red Jacket Tobacco, which lists its address as a post office box in Salamanca, N.Y., by calling the telephone number on a Money Mailer advertisement.

The advertisement had been mailed on three occasions to at least 20,000 New Jersey consumers. Several cartons of the cigarettes online bought by the investigator were brands that are not in the directory, including the 305's brand manufactured by Florida-based Dosal Tobacco Corp.

Altogether, Sypek imposed a total of $721,500 in penalties against Red Jacket and its owner, Hoag. The court also awarded the state $38,245 in attorneys' fees and $3,031 to cover the cost of the investigation. The litigation was handled for the state by Deputy Attorney General Cathy A. Tully.

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