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Tracey Makes 11th-Hour Plea To Defeat RYO Legislation

by Christine Stuart | Jun 12, 2012 4:30am
(4) Comments | Commenting has expired
Posted to: Town News, Norwalk, Labor, Legal, Smoke Shop Investigation, State Budget, Special Session

Facebook photo

The machines at Tracey’s Smoke Shop

The owner of two roll-your-own smoke shops sent an email to Sen. President Donald Williams on Monday begging for a chance to meet with him before the General Assembly decides to levy a manufacturing fee on her cigarette rolling machines.

Tracey Scalzi, who is not a registered lobbyist but spent the last week of the legislative session trying to defeat the legislation, says it could put hers and 13 other similar shops out of business before the end of the year.

“I can’t comply with the State of Ct to become a Manufacturer,” Scalzi writes in her 11th-hour email plea to Williams. “I’m involved with a court case brought on by the DRS and they are appealing the case.”

Scalzi is referring to the lawsuit the Department of Revenue Services brought against her shops seeking the right to call her a manufacturer so it could impose a $5,000 licensing fee on each roll-your-own tobacco machine.

Judge William Bright’s Feb. 24 ruling was narrow. It barred Scalzi from offering cartons and packs of cigarettes made in the machines for sale in the stores. It also found that as long as the customers were using the machines without the help of smoke shop staff, then the state couldn’t call them manufacturers.

That’s when the RYO legislation was born. It ended up on the desk of Finance Committee members on the committee’s April 3 deadline. The committee passed it 33-17. But the bill was not acted upon by the General Assembly before the end of the legislative session.

Scalzi, whose unconventional lobbying methods are detailed here, added in her email to Williams that she’s the sole provider for her two children and doesn’t know what she will do if she has to close her doors.

“I worked really hard to start this business and have loans and leases out and also have worked really hard to build my credit up after my divorce,” she wrote. “If I knew this business was going to cause so much controversy I wouldn’t have started it.”

Adam Joseph, a spokesman for Williams, said it’s “unlikely” she’ll get a chance to make her plea in person when she comes to the Capitol today for special session. But that doesn’t mean she won’t try.

RYO Filling Machines, the company to which Scalzi pays royalties every time a customer makes what amounts to about 200 cigarettes, hired Anthony F. Troy, a former attorney general of the state of Virginia and a senior partner in Troutman Sanders LLP to represent her store in court. Scalzi argues that she couldn’t afford that type of representation on her own.

But the retention of the law firm, which is not involved in Scalzi’s lobbying efforts at the Capitol, has some lawmakers scratching their heads.

“I was wondering who was bankrolling this,” Rep. Lonnie Reed, D-Branford, told the Branford Eagle last week. “And who was orchestrating it because this was a very sophisticated plan of attack. I knew it was bigger than Tracy Scalzi. This is somebody beyond her who created this approach. It is way too skillful.”

Scalzi objected to Reed’s characterization of her effort to defeat the bill. She argued Monday that if the fee is imposed it will put the stores out of business and the state won’t collect any of the revenue it anticipates.

However, Sen. Eileen Daily, co-chairwoman of the Finance Committee, has said levying the fee on stores like Scalzi’s is a matter of fairness.

She suggested that the RYO businesses still have a wide enough profit margin to absorb the additional expense or pass it along to their customers, who are still saving about $30 per carton by using these machines.

“Many people in our state are paying the cigarette tax as we have levied it,” she said. “They still have a big number between what we hear they’re selling for and what a carton of cigarettes is selling for. So they have the ability to recoup this expense.”

“I won my court case. I am not a manufacturer,” she told the Branford Eagle last week. “This bill should not be voted on next week because of these other [corruption] allegations . . . They are losing sight of the issue. This bill if it becomes law will bankrupt us and put us out of business.”

The roll-your-own legislation is part of a federal investigation that involved an undercover FBI agent posing as a prospective investor in one of these smoke shops. The undercover agent asked a man later identified as a union leader to set up straw donors to make illegal donations to House Speaker Chris Donovan’s campaign in order to defeat the legislation. Donovan’s campaign finance director was arrested in the sting and fired along two campaign aides. At least one of them has been identified as the former campaign manager and a co-conspirator.

At the moment there’s no evidence to suggest Donovan was aware of the RYO issue because it was a piece of legislation that was supposed to start in the Senate. The Senate never addressed it during the regular legislative session, which ended May 9, and it was always Gov. Dannel P. Malloy’s intention to make sure the legislation was part of the budget implementation language the General Assembly will vote on today.

Donovan has handed over his leadership role for the special session to House Majority Leader Brendan Sharkey.

As part of the federal undercover investigation $5,000 in donations also made their way to Republican PACS headed by House Minority Leader Lawrence Cafero. The donations were promptly returned once Cafero learned of their existence from federal investigators. According to Cafero, the feds told him during an interview in their Meriden offices that he was not the target of the investigation.

However, the investigation isn’t going to change Cafero’s position on the RYO legislation, which he opposed on both on a “procedural and philosophical level” before the federal investigation dominated the headlines.

“A whole bunch of business people went out and rented space. They hired people and bought equipment in reliance on the law. Now we’re changing the law just like that,” Cafero said. “These people will be out of business and they’ll probably be out of business by October.”

The original legislation would have given the smoke shops a moratorium for a year, but the legislation the General Assembly will debate today imposes the new fee on Oct. 1.

“Why in God’s name are we doing this now?” Cafero said.

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(4) Comments

posted by: Noteworthy | June 12, 2012  6:06am

This legislation is disgraceful and the reaction to the lobbying effort of a small business owner is even worse. Don Williams can’t spare a moment during the session or now to hear how the pending legislation will hurt job growth and small business in Connecticut. Nice - real man of the people.

Lonnie Reed’s rather shallow opinion that the individual lobbying effort was controlled by somebody other than the owner of the RYO shops because it was “too sophisticated” is demeaning and denigrates the ability and determination of a mom and business woman trying to save her investment and the employees who work for her. The state wants to tax each machine $5,000 - how many machines does Scalzi have? Only three machines per store means she would have to come up with another $30K. Maybe Lonnie Reed is part of that 1% who just have that kind of money laying around. Maybe Lonnie Reed should appreciate that this state is filled with small business people like Scalzi who see an opportunity, read the law and take a chance only to see the shallow and the shameless money grubbers in Hartford strip it away in a relentless pursuit of devouring our money.

But the stupid comment of the day award goes yet again to Sen. Eileen Daily. Her understanding of finance and business and Main Street economics is so utterly lacking, one has to wonder how it is she ended up as co-chair of Finance. Is it a matter of being the last person standing or do you have to actually have some expertise?

“From what we hear they are charging…they can absorb the fee…it’s a matter of fairness,” says Daily. First, Daily doesn’t know what “they” are charging. Second, the marketplace determines what people charge. Third, rolling your own cigs has been around forever - it just wasn’t done by a machine. Fourth - does Daily want to “make it fair” by taxing Lowes more than say a local hardware store on the Guilford Green in order to “make it fair?” Running a business is not a matter of everyone having the same price, same product so there is no reason to buy Brand X over Brand Y. It’s about choice; risk and reward.

This RYO legislation is about changing the rules in the middle of the game and for no other reason than you lost a court case; your speaker is under a criminal and ethical cloud; and this body of august “thinkers” in concert with the governor, lack the common sense and decency to control spending and borrowing. It’s shameful. All these people ought to be held to account.

posted by: Matt W. | June 12, 2012  9:15am

Matt W.

Noteworthy, I agree almost completely. As for Eileen Daily, I’m reminded of the words of Homer Simpson when I say that she is “stupid like a fox.”  She knows all too well that this legislation does nothing but put these people out of business.  No one will pay to RYO when there are no savings to be realized.  As a result there will be no tax revenue when these shops are put out of business and their employees added to the unemployment lines.  This is a NET LOSS to the state.  But make no mistake, she’s not stupid; she just doesn’t care.

posted by: Traceyssmokes | June 12, 2012  9:33pm

Thank you Noteworthy and Matt.
I couldn’t have said it any better!!!!
I tried to save my business and my employees ...It wasn’t about the Bill today it was about saving face.
People that I thought believed in me and my cause turned there back on me and the small businesses in Ct along with the soon 140 people headed to the unemployment line just before Christmas.
Ms Reed is not telling the truth about my supposed lurking in the bathroom. Ms Miller invited me into the bathroom to talk and introduced me to he…So Mrs Reed one day someone will throw you under the bus…like you tried to do to me.
I can sleep at night can they?

posted by: smokefree | July 8, 2012  1:20am

Eventually, when the price to continue one’s addiction to smoking (nicotine) reaches one’s individual limit, the addict will finally reach a mindset that it is time to stop and seriously decide to quit.

That is why the RYO cigarette route needs to have a level playing field when it comes to tobacco taxes.

As for those who have invested in RYO machines, the writing has been on the wall for a long, long time. Selling tobacco products is not a business that has a promosing future.

For anyone who chooses to invest in a business whose products they sell are proven health hazards if used as directed, they should stop crying that governmental measures to protect the health of its consituents will put them out of business. They should realize that more and more tobacco control issues will be implemented going forward until the tobacco pandemic is over. The writing has been on the wall.

Think about the eight-track tapes and eight-track tape players and the cassette tape. Anyone selling these products changed what they sold or saw they would go out of business. They could read the writing on the wall.

For tobacco product sellers, start thinking about changing your business plan that shifts away from selling tobacco products or face the inevitable. The writing is clearly on the wall.