Policy News

'Abuse of power': Tobacco company feuds with Florida regulators over bond price tag

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02/24/2021 05:29 PM EST

TALLAHASSEE — A West Palm Beach tobacco company says that Gov. Ron DeSantis’ top licensing agency is engaging in an “abuse of power” because it increased a state-mandated bond the company must pay by nearly $2 million.

The behind-the-scenes regulatory fight centers on claims made by tobacco wholesaler Basik Trading that the Department of Business and Professional Regulation "arbitrarily and capriciously” raised a bond it must pay to do business in the state from $39,000 to $1.8 million. Basik Trading distributes things like filtered cigars, pipes and smokeless tobacco.

The department is an executive agency that is part of the DeSantis administration. Earlier this month, DeSantis appointed Julie Brown to serve as its new secretary.

In a petition seeking further legal explanation for the bond price increase from the Department of Business and Professional Regulation and court documents filed as part of a separate lawsuit in Palm Beach County, Basik’s attorneys directly imply the increase is motivated by payback because of past and current legal challenges the company brought against the department over tax assessments and refunds.

“Worse yet, this is not the first time that DBPR has retaliated against Basik Trading,” read a Feb. 4 petition the company filed asking for a legal explanation as to why the department boosted the bond cost. “The DBPR continues to abuse its power and is now withholding refunds due to Basik Trading indefinitely, debilitating Basik Trading’s ability to conduct business.”

The petition was penned by attorney Alexandra Sierra-De Varona, who Basik hired to represent it in both the lawsuit and the Department of Business and Professional Regulation petition. In addition, on Feb. 9, Basik hired one of Florida’s largest lobbying firms, The Southern Group, to represent it in its regulatory feud with the agency.

In the Palm Beach County lawsuit, which was originally filed in October but amended Feb. 11, Basik is also challenging “millions of dollars” in tax assessments it says the department wrongly assessed on out-of-state business. The lawsuit was amended to add Basik's challenge to the legality of the state's surety bond statute.

“The DBPR imposed the tax even though Basik Trading provided the DBPR bills of lading or waybills that demonstrate that the sales were outside of the State of Florida either in other states or overseas,” read an amended complaint filed with the court on Feb. 11.

The size of the bond is tied, in part, to taxes it pays the state. Agency officials landed on the new $1.8 million bond price by using Basik’s Nov. 2018 tax bill, which was its largest ever. The number was outlined in a department audit of company finances between June and November 2018, which was used to set the new bond price. During that time, Basik’s monthly taxes ranged from $53,114 and $1.8 million, records show.

“Based on our last audit, June 2018 to November 2018 Basik Tradings bond needs to be increased from $39,000 to $1,887,973,” read a Jan. 25 email from Jerry Russo, a Department of Business and Professional Regulation senior tax auditor to company officials.

In its lawsuit, Basik says it has paid $388,000, a number it arrived at after consulting with its own outside tax adviser.

An agency spokesman did not return requests seeking comment. The state has not yet filed any response to the Palm Beach County lawsuit, court records show.

In its lawsuit, Basik is clear about what it thinks is motivating the bond fight: “retribution for Basik Trading’s previously successful two prior lawsuits against the DBPR.”

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