Back in September of last year, Frank Herrera of CigarLaw and La Caridad del Cobre wrote a piece that highlighted some internet chatter regarding the status of the Vice President of Habanos S.A., Manuel García. A month or so later, it became pretty apparent that Mr. Garcia had been imprisoned on charges relating to corruption. Manuel was noticeably absent at the XIII Festival del Habano and Habanos refused to comment on his status. Those that were there and could find someone to talk, once again confirmed that he was in jail on fraud and corruption charges.
Earlier today, those rumors were confirmed by The Economist, who published an article entitled, “Cuba’s cigar industry: Smoked out,” stating that Mr. García was being charged of corruption. Interesting highlights from the article:
Since August 2010 (Manuel García) has been in jail, accused of masterminding graft on a grand scale.
Cuban investigators believe they were able to do so because Mr García and ten of his staff, who also face trial, sold genuine cigars at a fraction of their normal price to black-market distributors in the Caribbean in return for bribes. Up to 45m cigars may have been sold this way. Since handmade habanos fetch up to £40 ($65) each in shops in the St James’s district of London, the loss was considerable.
Interestingly, they tried to get comment form Imperial Tobacco, parent of Altadis S.A., who owns a 50% stake in Habanos S.A.:
Imperial has made no comment on the affair. But like the government, it will hope that the new management team at Habanos preserves the lucrative monopoly in Cuba’s most famous product.
There has been lots of speculation as to the details of the corruption, The Economist, seems to indicate it has to do with grey market dealers, a fixture in the Cuban cigar industry, particularly for U.S. customers. The article describes the situation:
That did not prevent the small-scale peddling of black-market cigars on the streets of Havana. But in the past decade the system has faced a bigger threat from dozens of online cigar retailers operating mainly from Switzerland and the Caribbean. Many operated legitimately, but some offered improbably low prices.
Others have thought that perhaps the selling of raw materials, fraud regarding payments for packaging materials and illegal actions with legimitate Habanos suppliers, but there’s been zero evidence.
Once the trial starts, we will know more details as to what exactly Manuel García is being accused of, but until then… it’s going to be speculation. As his been mentioned, this is part of a much larger issue regarding corruption in Cuba and if this article is any indication, the future for Mr. García is not bright.