For the first time, cigar counterfeiters face stiff penalties rivaling that of major felons. Five Miami men, accused of counterfeiting cigars, face federal charges carrying a sentence of up to 10 years in prison and $2 million in fines.


The five defendants have essentially been arrested twice on the same charge with drastically altered penalties. The defendants were first arrested in December 2005 as the result of a sting operation between the Fort Lauderdale, Florida-based cigar giant Altadis U.S.A. Inc., Miami-Dade police, U.S. Secret Service and the United States Postal inspectors office. Officials raided the homes and businesses of Juan Penton, Miguel Guerra, Filiberto Marimon, Hugo Endemano-Portal and Lauro Perez, and reportedly seized more than $100,000 worth of counterfeit cigars. The authorities also seized enough bands and boxes, according to Altadis U.S.A., that could have been used in the sale of hundreds of millions of dollars of fake cigars annually.


The defendants were allegedly involved in the trafficking of counterfeit Cuban and non-Cuban cigars. The confiscated brands included Cohiba, Hoyo de Monterrey, Montecristo, Partagas, Romeo y Julieta, Trinidad, Saint Luis Rey, Bolivar, San Cristobal and H. Upmann cigar brands. Altadis U.S.A. owns the U.S. rights to many of those brands. General Cigar Co. owns the U.S. rights to Cohiba, Partagas and Bolivar.


At the time, the punishment would have come under Florida state law, which would have been considerably less severe. According to the U.S. Department of Justice, the defendants were originally arrested under state law because the state issued the search and arrest warrants.

"The fine would have been inconsequential," said Charles Grimes, of Grimes & Battersby LLP., lead counsel for Altadis U.S.A. "The worst penalty would be the loss of the merchandise."

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"There has always been in the past a perception among those in the counterfeiting community that there are no risks…prosecution under state law was viewed as merely the cost of doing business," ..said Grimes

Following the arrests, the defendants were let free on bail and their case at the state level is still running through the normal proceedings. After the arrests, authorities aiming for federal charges collected evidence, analyzed it and submitted it to the U.S. Attorney in Miami.


On March 17, U.S. Immigration and Customs Enforcement (ICE) announced that a Miami federal grand jury indicted the five accused counterfeiters on charges of trafficking and conspiracy to traffic counterfeit products.


"A lot of people thought that this [the December arrest] was not a big deal and would amount to a slap on the wrist," said Janelle Rosenfeld, vice president of advertising for Altadis U.S.A. "But now that it's federal, it carries a significantly stiffer sentence."


In a statement, Altadis said it would take action against any importer, distributor, retailer or other entity that deals in counterfeits. In a separate case in January, the company helped to bring about the arrest of two retailers accused of selling counterfeit cigars, one of which was also a legitimate customer of the company.


"Once again, this operation is part of an ongoing, determined effort by Altadis to protect its interests and those of its distributors and consumers, as well as the entire industry," said Theo Folz, president and CEO of Altadis U.S.A. in a statement. "No one who is now dealing in counterfeits can claim that they are doing so innocently. We are moving forward with an aggressive enforcement program that will go after anyone not respecting our rights."


Grimes went on the say that the federal prosecution was made possible now because of the investigations spearheaded by Altadis U.S.A. over several years, which netted important information in building a case for federal charges.


Added to this, the Stop Counterfeiting in Manufactured Goods Act, an amendment to the federal anticounterfeiting law signed by President Bush on March 16, will make it easier for prosecutors to invoke federal charges in future counterfeiting cases. Under existing federal law, those convicted of dealing in fraudulent merchandise of any kind, whether it be DVDs, handbags, pharmaceuticals or cigars, are looking at a maximum of five years in prison and fines of up to $2 million for conspiracy to traffic in counterfeit goods, and 10 years and a $2 million fine for actually trafficking counterfeit goods. Under the new law, the penalties are the same, but the trafficking in the packaging and labels of counterfeit products also becomes a crime.


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