Reynolds Seeking Millions Back
WINSTON-SALEM, N.C. - R.J. Reynolds Tobacco Co. is seeking millions of dollars from five wholesalers and retailers Reynolds claims defrauded it of promotional money designed to lower store prices for cigarettes.
Reynolds said it had filed the lawsuit Wednesday in North Carolina federal court. The lawsuit seeks $5 million in compensatory damages. Under state and federal unfair trade practices laws, the damages could be tripled. The nation's second-largest tobacco company behind Philip Morris Co., claims the defendants created fraudulent cigarette orders and sales invoices to steal millions of dollars related to Reynolds "buy down" promotional program.
Under "buy down," Reynolds makes direct payments to retailers to discount the retail price of cigarettes by passing the discounts on to customers. Instead, the lawsuit alleges the defendants pocketed the money, Reynolds said.
The lawsuit names as defendants wholesaler Southern Sales & Import and retailers S K Everhart Inc., Southland Trade Corp., Great Steaks, and Kingsway Enterprises Inc. All of the companies are based in North Carolina, said John Singleton, a Reynolds spokesman based at the company's Winston-Salem headquarters.
Individuals associated with these organizations also are named as defendants. Reynolds did not name the individuals in a news release announcing the lawsuit. Singleton did not have the names Wednesday night; the federal court was closed Wednesday evening.
Steve Everhart, owner of S K Everhart Inc., based in Trinity, said Wednesday night he was unaware of the lawsuit but denied the allegations. A message left at Southland Trade Corp. offices in Moyock was not returned Wednesday night. Calls rang unanswered at Great Steaks, Kingsway Enterprises and Southern Sales & Import.
Another wholesaler, Central Wholesalers Inc. has admitted its involvement in the scheme and provided information to help Reynolds in the lawsuit, Reynolds said. Central Wholesalers has paid restitution to Reynolds Tobacco.