THE Bulacan-based tobacco firm to be investigated by the House of Representatives and a local court was also found to be facing multiple investigations for tax evasion and technical smuggling in the United States (US).
Reports noted that Mighty Tobacco Corp. has attracted the attention of three US states now seeking to enforce court judgments against the Philippine company.
The states of California, Oklahoma and Oregon have earlier won court cases against Mighty for “acts of unfair competition.” Official court documents showed that Mighty and its co-defendants owe these three states over $21 million including “judgments, penalties, fees and post-judgment interests.” Court records also showed that Mighty has been prohibited from selling cigarettes in these states.
The three US states are now seeking enforcement of judgments rendered against Mighty in their respective jurisdictions.
However, retired Judge Oscar Barrientos, executive vice president and spokesman of Filipino-owned Mighty Corp. (MC), on Wednesday debunked as malicious and damaging a multinational tobacco giant’s persistent demolition job in the media on their firm.
Asked what could be the reason, Barrientos said: “Actually, it’s the least of our concern. But, knowing how the tobacco industry in the country has been regarded as a strong lobby group before our legislators, I will not be surprised if it turns out later that the giants simply wanted a whipping boy with which they can be noticed of and invite the attention of Congress to have the ‘sin tax’ law amended. And, they’re doing it on us, knowing that we’re small, a purely Filipino company with no global presence, not influential in governance and they can do anything at will. This is typically an attitude of a bully.”
Records proved that a judgment was rendered in Sacramento County, California (docket number 03AS02298) on September 28, 2006 with a total current amount of fines due as $7,968,857. Three judgments were rendered in Oklahoma county, Oklahoma on December 20, 2003; September 10, 2004; and on May 9, 2005 for a total fine of $4,092,283. Two were rendered in Marion county, Oregon on March 25, 2003 and on July 2, 2003 for a total due of $9,307,600.
Based on the court documents, Mighty violated laws of California, Oklahoma and Oregon by failing to comply with state laws requiring that all tobacco product manufacturers to set aside money for healthcare costs from smoking-related illness.
As a result, the three states obtained binding judgments against Mighty in state courts.
In the Sacramento county case filed by then California Lawyer General Bill Lockyer on September 28, 2006, the state noted that Mighty “sold and continues to sell cigarettes directly or indirectly, to consumers in California” without paying the reserve fund requirement of the California Health and Safety Code.
Charged with “acts of unfair competition” as defined in the California Business and Professional Code, Mighty, according to the lawyer general, sold 5.96 million cigarettes in the year 2000 and 51.95 million in 2001.
The judgment was rendered by Sacramento County Superior Court Judge Shelley Anne W. L. Chang on November 9, 2006 and court officer Kim Lahn certified under oath that she served the Notice of Entry of Judgment to a certain Ernesto Victa, Finance Manager and Lilia Ong secretary/director of Mighty Corp.
Local industry players here have similarly complained against acts of unfair competition against Mighty before Finance Secretary Cesar Purisima who ordered the Bureau of Internal Revenue and Bureau of Customs to look into these alleged questionable practices.
BOC documents obtained by the DoF showed that in 2011 and 2012, Mighty imported tobacco at $0.68 a kilo while the rest of the local industry imported between $3.39 and $6.75 a kilo. For the same period, Mighty imported acetate tow, the raw material for cigarette filter, $0.30 which is way below the industry import price of $5.36 to $6.25.
The BIR is now looking at possible under declaration of volumes to explain Mighty’s ability to sell at a very low price. For the first six months of 2013, the company reported to the BIR sales of 244 million packs. A retail trade audit conducted by the independent AC Nielsen showed that sales could actually be as high as 614 million packs. The difference of 370 million, if excises taxes and value-added tax were paid on them, could easily yield P4.9 billion for the government.
Besides these twin investigations, the House Ways and Means Committee is also set to conduct its own probe in aid of legislation to plug possible loopholes in the sin tax law.
On the competition’s charges that MC may have committed fraud, Barrientos said fraud is a serious offense and as such, it should be proven by complete evidence, adduced in an impartial investigation, conducted by a competent authority, with due regard to the due process requirement.
Under existing jurisprudence, Barrientos said, fraud is not to be presumed, it should be actual. Imputing fraud against MC is not only unfair but highly libelous and damaging. Under the law, good faith is presumed, bad faith is not. Customs authorities have been closely monitoring MC operations, reporting and compliance.
They found nothing wrong. These findings of government offices enjoy the presumption of regularity of official functions.