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October 1998
Volume 25
Number 5

RETAILER & TOBACCO INDUSTRY NEWS

Hurricane Georges Batters Dominican Republic
Chateau de la Fuente Devastated; Housing Loss Major Priority
Hurricane Georges tore through the Dominican Republic in September, causing an estimated $1.2 billion in damage to farms, roads, and buildings. As of September 28, the death toll reached 201, but the U.S. Agency for International Development stated the final count was "almost certain" to exceed 500. In addition, more than 100,000 people were left homeless. Most of the country's cigar factories - located in Santiago - came through the storm unharmed. Several suffered varying degrees of damage and disruption of business due to the hurricane.

Chateau de la Fuente, the Fuente family's farm located outside the town of Caribe, was hit hardest. According to Wayne Suarez, an executive of Fuente and Newman, the farm sustained heavy damage as 18 tobacco barns, some built almost 15 years ago, were completely destroyed. Fortunately, the barns were empty as it is not tobacco growing season. According to the company's website, cigarfamily.com, prior to the hurricane, Tabacalera A. Fuente had just begun planting the Chateau's seed beds. They too were mostly destroyed. In addition, the Chateau's landscaping, which took years to develop, was demolished. "It was basically like a war zone," said Suarez, in describing the farm's condition. "It was pretty devastating.

The Fuente's factories, located in Santiago, were unharmed. "It could have been a lot worse," noted Suarez. "Thank God no one was hurt. But we'll rebuild and we'll be back." The Fuente family is determined rebuild Chateau de la Fuente, reports cigarfamily.com, reiterating its commitment to the Dominican Republic and to the production of the Chateau's very special tobacco wrappers, used exclusively on the company's Fuente Fuente Opus X cigars.

Consolidated Cigar Corp. sustained minor damage to their factory in La Romana, according to Theo W. Folz, the company's president and c.e.o. "The factory is in good shape," he added, "though we lost some tobacco and some finished goods." Approximately 250,000 cigars, ready for shipment, were destroyed in the storm. At press time nearly a week after the storm, the phones remained down and the power out, so the company did not yet have a full assessment of the situation. Consolidated's main concern, said Folz, is to provide relief to the factory workers and the people of La Romana. A large majority of the area's residents had their homes destroyed or significantly damaged as the coastal city was the first area hit by the hurricane on its way through the Dominican.

Consolidated also suffered losses in Puerto Rico, where Georges hit before making its way to the Dominican Republic. The company's two factories, which manufacture machine-made cigars, lost all power. Folz said the loss of electricity will set the company's production back about a week-and-a-half. There were no injuries, but as in La Romana, many lost their homes.

The two factories owned by Caribbean Cigar Co. sustained only slight damage, according to J.D. Jenkins, c.e.o. and president of Caribbean. Jenkins is also chairman and c.e.o. of SJI Group, Inc., which purchased all of Caribbean's inventory and now serves as its exclusive distributor in the U.S.

Pedro Martin of Tropical Tobacco, manufacturers of the Don Juan and V Centennial lines, reported no damage to the company's factory in Santiago. According to Martin, due to the mountains surrounding the valley in which Santiago lies, the hurricane barely reached the city.

Synergy Brands, which is presently growing Cuban-seed wrapper in Santiago for a new cigar line, said their operations were not hindered as a result of the hurricane. The company stated that its wrapper leaf that was harvested earlier for its new Corojo cigar line remained safe, and are currently being cured in its Dominican factory.

Cuba's cigar industry did not sustain much, if any, damage according to early reports, as the storm did not hit during growing season for cigar tobacco. The main tobacco-growing regions of the island, Pinar del Rio and Partido, are located in the western part of Cuba which was spared by the storm. The cigar factories, most of which are located in Havana, were also unharmed by the hurricane.

Bits & Pieces
JAKOBSTAD, Finland - One of the world's oldest cigar factories, and the oldest factory in the Nordic countries, closed its doors for good in September. The factory, known as Strengberg, has been making cigars since 1762. It was recently acquired by Swedish Match, which moved production to Belgium and the Netherlands. FT LAUDERDALE, Florida - Havana Republic, Inc., operator of two cigar stores /lounges in Ft. Lauderdale's Las Olas Riverfront and the Country Isles Plaza of Weston, was recently named as an authorized retail outlet for Davidoff cigars and accessories. Their first shipment of cigars arrived in July. RICHMOND, Virginia - Multinational tobacco grower Universal Corp. announced that for the fiscal year ended June 30, 1998, international tobacco results were well above those of last year. The company reported that dark (cigar) tobacco results improved substantially. Although supplies of filler and binder are now adequate to meet demand, cigar wrapper continues to be in short supply, the company says.
Cigar Bars Raided in New York City
Owners, Patrons Snared in Contraband Cuban Cigar Crackdown

On August 5, Federal agents raided two business establishments on Manhattan's East Side and made a series of arrests in a crackdown on the sale of illegally imported Cuban cigars.

Customs agents, armed with search warrants, raided the Racquet & Tennis Club, a men-only private club, and Patroon, a posh restaurant and cigar room, seizing numerous cases of illegal cigars from the walk-in humidors of the establishments. The agents arrested Robert Gressler, manager of the Racquet & Tennis Club, and Alex Hasbany, manager of Patroon's cigar room. Also charged was Kenneth Aretsky, owner of Patroon, who surrendered to authorities the next day.

Then, on August 6, four high-powered executives were also apprehended in the Federal sweep, charged with illegally purchasing Cuban cigars over the last two years. Authorities say the men had the cigars delivered to them at their office or at home. The four men charged, who allegedly spent up to $1,200 per month on the cigars, were Edward Marron, c.e.o. of Related Companies, a large real estate firm; Laurence Zimmerman, c.e.o of Landover Holdings, a multi-million dollar U.S. conglomerate; John Steinhardt, Chase Manhattan's head of U.S. securities; and Kenneth Joseph, head of WH Industries, a privately-held manufacturer of automotive parts.

The raids and arrests followed an undercover investigation, which began in April, starting with the arrest of a Connecticut couple who allegedly traveled to Cuba, Spain, Morocco, and France to purchase the cigars for sale on the East Coast. The man was later identified as Andrzej Moszynski of Darian, Conn., a 52-year-old commercial properties manager. According to authorities, Moszynski supplied numerous clubs and bars with cases of Cuban cigars.

Moszynski and his female companion, known to customers as Jennifer Corona, agreed to cooperate with authorities and hand over their customer lists, which included many individuals, businesses, and private clubs in New York. The woman, who was not charged with any crime, also agreed to wear a hidden recording device while selling the Cuban cigars. According to authorities, the Customs agents then posed as cigar smokers, showing up at Patroon, where they observed boxes of Cuban cigars.

Aretsky and Hasbany were charged with buying 1,950 of the banned cigars valued at more than $37,700. It is alleged that the Racquet & Tennis Club had ordered 26 boxes of Cuban cigars valued at about $11,800. Authorities also say Marron purchased 15 boxes of Cubans, spending approximately $9,750. Zimmerman was charged with buying 617 illegal cigars, spending $11,000 in one year. Steinhardt spent $12,000 on 22 boxes and Joseph shelled out over $21,800 for 46 boxes.

Two more people were drawn into the federal crackdown on August 7, with the arrest of Michael Dana, managing director in the investment banking division at Donaldson Lufkin & Jenrette, and Jeffrey Kelter, president of a real estate investment company in suburban Philadelphia.

All those arrested were charged with violating the Trading With the Enemy Act, which carries fines as high as $10,000 and ten-year prison sentences. In September, federal prosecutors dropped criminal charges against Steinhardt and Dana.


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