Last Call: New York Distributor Fined in Bottle Return Scam; TTB Says No to Controlled Substances in Beer

Oak Beverages to Pay $4.3 Million Settlement in Bottle Return Scam

New York wholesaler Oak Beverages Inc. must pay a $4.3 million settlement to the state for a scheme to steal $1.85 million in bottle deposits between 2013 and 2016, New York Attorney General Barbara Underwood and Rockland County District Attorney Thomas Zugibe announced, via a press release.

According to authorities, the Blauvelt-based wholesaler inflated the number of bottle returns that it received in a scam run by now-former general manager Manuel Busto Sr., who is now facing felony charges of first-degree grand larceny and second-degree tax fraud, the outlet reported.

“In carrying out this elaborate scheme, the defendant cheated the state by falsely inflating the number of bottle returns received,” Zugibe said, via the press release. “When cheaters scam the government, law-abiding citizens end up footing the bill. Defrauding New York’s Returnable Container Act is not a way to make easy money.”

The state alleges that Busto modified customer invoices in order to exaggerate the number of empty containers collected on drivers’ daily routes. In some cases, Busto allegedly created fraudulent invoices showing that empty cans and bottles were collected from stores when no containers were actually picked up. Busto is also accused of instructing low-level employees to modify an electronic sales database to reflect the fudged numbers.

In a statement to LoHud.com, Oak Beverages said: “We cooperated completely with the state’s investigation and also hired an independent firm to conduct their own full-scale forensics accounting into the matter. Once it was confirmed and the individual was identified, the party was terminated and we took responsibility and agreed to the settlement. Since then, Oak Beverages has instituted new policies and procedures to ensure full compliance with appropriate checks and balances.”

A former Oak Beverages employee alerted authorities to the scheme and will receive about $948,000 from the settlement.

TTB Restates Ban on Controlled Substances in Alcoholic Beverages

The Alcohol and Tobacco Tax and Trade Bureau (TTB) clarified that it would not approve formulas or labels for alcoholic beverages that use controlled substances, such as marijuana, as ingredients, the agency said in an FAQ posted to its website.

The federal agency said it would not approve formulas or labels for products that contain tetrahydrocannabinols (THC), cannabidiols (CBD) and terpenes derived from any part of a cannabis plant are not excluded from the Controlled Substances Act (CSA) definition of marijuana “regardless of whether such substances are lawful under State law.”

However, exclusions do exist, including “hemp seed oil, sterilized hemp seeds and non-resinous, mature hemp stalks.” But products using those ingredients will still need to receive approval, the TTB said.

The TTB added that it would consult with the Food and Drug Administration (FDA) and the Drug Enforcement Agency (DEA), the latter of which it will defer to on the interpretation of illegal substances.

Additionally, for alcoholic beverages containing hemp, the label must identify the ingredient in a way that notes it is not a controlled substance (for example, saying “hemp seed oil” rather than “hemp oil”). Labels also cannot give the impression that the product contains a controlled substance or gives the effects of one.

The ban on CBD-infused beers is bad news for Vermont’s Long Trail Brewing Company and others who have used it in beer products. In March, the TTB told Long Trail that it could no longer sell a CBD-infused beer, Medicator.

Meanwhile, the San Francisco Chronicle reported that the TTB ordered Black Hammer Brewing, which had produced eight beers containing CBD, to cease production of those products until it had received the required formula approval for the beers.

Hill Farmstead Founder Discusses Mental Health in the Beer Industry

An interview with Hill Farmstead Brewery founder Shaun Hill in the United Kingdom’s The Morning Adviser has caused a stir in the brewing industry. In the story, headlined “Beer industry ‘not discussing’ mental health and alcohol link,” Hill is quoted saying “mental health and alcoholism never get discussed in the beer industry.”

“It would be amazing if, at Craft Brewers Conference one year, there was a seminar or a talk on dealing with alcohol,” he told the outlet. “It would probably be the worst attended seminar ever because nobody wants to admit it.”

The story goes on to quote Hill, who was in the Czech Republic to give a keynote speech at the Institute of Brewing and Distilling Innovation Masterclass, saying, “I don’t know anyone in the beer world who isn’t struggling with it.”

Hill has since posted in a Beer Advocate forum saying that his comments were taken out of context and part of a longer interview. Hill wrote that he takes issue with the article’s portrayal of him “as if I am some sort of of new wave prohibitionist with a puritanical self-righteousness.”

“I am made to appear that I took an interview in order to talk shit about all of my peers for being drunks and mentally ill,” he wrote. “The quotes/lead are out of context and, frankly, quite frustrating.”

Read the full story here and read Hill’s entire reply here.

O-I to Close Atlanta Plant

Owens-Illinois Inc. (O-I), one of the world’s largest glass container manufacturers, announced plans to shut down its Atlanta, Georgia, plant in mid-July, according to a press release issued last week.

O-I, which employed about 250 workers at the Atlanta plant, cited the “continued decline of beer in the domestic market” among the reasons for the closure.

In the press release, the Ohio-headquartered company said customers of the Atlanta plant would be served by its other 18 U.S. facilities. The company added that ceasing operations in Atlanta would help balance its domestic supply-and-demand.

Beer Institute Releases Domestic Tax Paid Estimate for April

April marked the first month of 2018 in which U.S. breweries shipped more beer than during the same time in 2017, according to the Beer Institute (BI), which cited unofficial estimates of domestic tax paid shipments from the TTB.

April’s shipment numbers stemmed three consecutive months of declines as U.S. brewers shipped about 14.6 million barrels of beer, up 1.3 percent over last year. However, BI chief economist Michael Uhrich noted that on a selling day adjusted basis, domestic beer volume actually decreased 3.6 percent, which he attributed to “near record-low temperatures” across the U.S., as well as an early Easter holiday.

Through the first four months of 2018, U.S. brewers shipped more than 52.5 million barrels of beer, down 2.7 percent compared to the same period last year.

MillerCoors Accuses South Korean Beer Brand of Trademark Infringement

As MillerCoors attempts to defend itself against a trademark infringement lawsuit brought by San Diego craft brewery Stone Brewing, the U.S. beer division of Molson Coors now finds itself in a trademark battle with South Korean beer brand Hite, according to the Korea Herald.

MillerCoors recently filed a petition with the U.S. Patent and Trademark Office to block Hite Jinro’s registration for its lager, Hite, for allegedly copying ts logo, font, design and image as well as the pronunciation of its name, the outlet reported.

For its part, Hite denied the claims and said the Miller Lite brand uses a widely used font.

The trademark fight comes after Hite Jinro opened a U.S. distribution center in Los Angeles last year.

Anheuser-Busch Releases 2 New Bud Light Dilly Dilly TV Ads

A pair of new Bud Light ‘Dilly Dilly’ ads will begin running this weekend. The first ad features Bud Light line extensions Lime and Orange and calls back to the original commercial. The second spot is a Spanish-language ad in support of the World Cup, according to AdWeek.

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