Of all the warehouses in Rotterdam, Bartel’s personal favorite was F. Tabaknie N.V. The owner and manager of Tabaknie was a Dutchman named Jan van der Meer. Jan van der Meer was in his early fifties and had been in the warehousing business for over thirty years. He had developed the business from the ground up and was now moving upwards 50,000 cases a week through his warehouse. More than half of this traffic was in cigarettes. Tabaknie had become a behemoth with more than 500,000 square feet of temperature controlled space specifically allocated for cigarettes and tobacco items.
Some years ago Ron and Marcia Bartel had made the trip to the Netherlands to meet with all the major warehouses in Rotterdam. Tabakanie was about an hour’s train ride from Rotterdam proper. Both the Bartels had expected Tabaknie to be on heavily traveled roads. But much to their surprise, Tabaknie was in a small town called Roosendaal which was connected to the ports of Rotterdam as well as Antwerp via train and road. Containers would move inland to Roosendaal from the major ports of Rotterdam and Antwerp by road once they were unloaded off the steamship at the ports. This was the only disadvantage of using Tabaknie over the other warehouses in Rotterdam. The extra transit time and distance to and from the ports added trucking costs. While this was a small price to pay, this was more than overcome by the service and the strict confidentiality that Tabaknie offered. Confidentiality was everything in this business. Brand name cigarettes and liquors were being shipped to Rotterdam and onward into Taknakie’s warehouses by dealers who were major distributors and agents for the brand. Some of the most powerful and well-known corporation’s distributors were shipping their merchandise and would never ever want their identities disclosed to anyone. These distributors were selling on the parallel markets, which were markets and regions outside their assigned geographical regions. This was not in line with the guidelines given by the brand owners.
As an example, for the Marlboro cigarettes distributor for the Caribbean, it would be unthinkable to sell Marlboro outside of the Caribbean. Should he consider selling outside of his assigned region, he would have to be very sure that Philip Morris does not find out. Should Philip Morris find out that Marlboro meant for the Caribbean showed up in other markets, he would lose his distributorship or agency. The only exception would be if Philip Morris decided to look the other way. Even then confidentiality is a must so that no shipment can be traced back to the original shipper. For this kind confidentiality, Tabaknie was the only true option as there was nobody better at keeping matters of utmost discretion under wraps.
When he and Marcia had made the first trip to the Netherlands, Ron had made it a point to plan a stop at all the major warehouses in the ports of Rotterdam and Antwerp. He wanted to make full use of the trip. The Bartels had flown to Brussels from New York and had rented a vehicle in Brussels. Then they had driven to Roosendaal in the Netherlands just across the border from Belgium. Roosendaal was a quaint little town. The visit to Tabaknie N.V was rather uneventful probably reflecting the personality of Tabaknie as being low profile and keeping matters quiet. The front parking lot was quite small. The offices were non-descript and very generic. Jan van der Meer had ushered both Ron and Marcia into his office and had a long chat with them.
Jan was very knowledgeable. The knowledge he had was priceless. As the owner and operator of Tabaknie, he knew which brand of merchandise was coming from where and was ending up in which market. That was priceless information. Most of the shipments would pass through several channels of brokers with each broker adding his margins along the chain. This was necessary to keep confidential identities of the true major players in the game. Moreover, this allowed deniability by the main players and no one person in the chain knew the actual origin source of the product and the final end destination of the shipment.
F. Tabaknie was a very successful but discreet warehouse. Its appearance from the outside would have never made a person on the street pay any real attention to it. Its entrance into the parking lot was very average and the parking lot was small, perhaps a capacity to allow twenty five cars at most to park in the lot.
One of the most used but least known aspects of Tabaknie’s business was its ability to act as an escrow agent. Basically, a buyer could send the payment for the goods that were stored at Tabaknie, directly to Tabaknie’s escrow account. Tabaknie would transfer title of the goods to the buyer and send the payment to the seller simultaneously. This service was an absolute necessity in most cigarette trades because of the use of brokers who could bring a buyer and a seller together. The escrow service allowed a broker to get his cut of the commission from the escrow account and keep the identity of the buyer from seller and vice versa.
For example, it was normal for Bartel to put together cigarette deals where the seller had his cargo stored at Tabaknie and was looking to sell his cargo for $300,000. Bartel would be offered this by the seller as Bartel had a large base of clients and many sellers would send their offers to Bartel knowing full well that he would make discreet deals on the cigarettes. Bartel would offer this cargo out to his clients for $315,000 which would include a commission for Bartel of $15,000. If a buyer agreed to the deal, Tabaknie would send a warehouse confirmation via fax or email to the buyer on Bartels behalf. This way the buyer had confirmation that the merchandise existed. The buyer would wire the entire $315,000 for the purchase to Tabaknie’s escrow account. Tabaknie would follow Bartel’s instructions and paperwork and pay the seller his $300,000, pay Bartel his $15,000 and transfer the title of the cigarettes to the buyer. The buyer would send his shipping instructions directly to Tabaknie and have the cargo shipped to wherever the buyer need the cargo shipped.
This allowed the seller to keep his identity secret. The buyer kept his identity secret. Bartel and Tabaknie kept all identities secret and all amounts disbursed secret. Seller would never know who the buyer was or where the goods were shipped to. The buyer would never know who the seller was and from where the goods came into Tabaknie’s warehouse. Bartel would never know where the goods came from nor where they were being shipped to as Tabaknie would never disclose this. Tabaknie was the only entity who had a full picture of the entire deal but van der Meer’s operation was completely based on confidentiality and he would never ever allow any information leaks. All his employees were sworn to strict confidentiality agreements and most were his family members which made it easy to keep a lid on things.
Tabkanie also had another precious asset. That was Jan van der Meer’s younger brother, Patrice van der Meer. Patrice, who was a couple years younger than Jan van der Meer. Patrice was an expert at inspecting cigarettes. This was a skill that he had developed over many many years of cigarette inspections. All cigarettes come with codes on the pack that can usually be deciphered by only the manufacturer’s production managers. Every pack of Marlboro has on it codes imprinted or engraved. The codes represent the production date, location of the factory that produced it and the factory production cycle. This is crucial in determining the authenticity of the cigarettes and also in confirming the freshness of the cigarettes. The cigarette market is deluged with counterfeits as well as authentic stocks of cigarettes that are old and stale and have spotting on them. Neither product is acceptable to most buyers. There is a separate and more unscrupulous market for the counterfeits and the old stale cigarettes. But Tabaknie never dealt in any such products and neither did Bartel and his clients.
Patrice had cracked the codes and deciphered how to interpret the production code which gave the date of production of the cigarette, the factory where the product was produced as well as which production cycle it came from. This allowed him to put his stamp on the product as authentic or not and as fresh or not. Furthermore, he would issue a report after his inspection where he would rank the product on a ten-point scale for freshness and suitability for human use. A rank of 9 or 10 would be the only two levels acceptable to most legitimate buyers. A rank at 8 or below would be considered as stale and old cigarettes. If the cigarettes were fake, Patrice would
clearly state on his report that he considered the product to be counterfeit and not original.
In fact, Patrice was now so good that he could smoke a cigarette from the cargo he was inspecting and could immediately tell whether the product was original or counterfeit and whether it was fresh enough or not. Patrice offered his services for a fee. It was a very nominal fee if the inspection was in any of the warehouses in Rotterdam as he only had to drive a short distance. He also offered his services for inspection for cargo stocked all over the world. He would charge for first class flight tickets, five-star hotel accommodations, and then add his expertise fees. No matter where a stock of cigarette was located, Patrice would be willing to inspect for a fee.
Most buyers would be happy to pay the fee as an insurance against being sold a stock of fakes or old and stale cigarettes. As each container load of cigarettes would be worth upwards of $350,000, a small fee of $250 for inspection in the Netherlands or even a fee of $10,000 for inspection of cargo in Miami or Hong Kong was well worth it for most buyers.
Bartel never undertook a cigarette deal without Patrice’s inspection. It was a policy he never wavered from as he had heard horror stories from many buyers who had been sold fake goods or old goods. Fake goods are usually seized by the customs during importation. Old cigarettes are worthless as no one can distribute them into the stores or hotels or restaurants.
As a policy, van der Meer never allowed anyone who was not an employee of his to go inside his warehouse. It was a very strictly enforced policy. The reason was rather obvious as van der Meer didn’t want anyone to know what products he held in his warehouse for his clients. Years of habit had just cemented his method of operation and he never wavered from the rules. After meeting with van der Meer, the Bartels wanted to take him out to dinner. As it happened, van der Meer was celebrating his wife, Helen’s birthday that evening with a lavish party for her and had to excuse himself from the dinner invitation. He did, however, suggest to the Bartel’s to go to a restaurant called Van der Put. The Bartels had taken the suggestion and it had one of the best dinners they had experienced in a long time.
Chapter 3: Miami
Bartel and Littleton continued their price exchanges back and forth for a whole variety of products and brands. Heineken beer was the only product they seemed to have clicked price-wise where prices worked for Littleton to sell and for Bartel to buy from him. The volume of business on Heineken shipment started to increase as the months went by. Within a few short months, the two men were doing over ten containers a month in Heineken shipments. That was shipments exceeding 20,000 cases of 24 cans of Heineken beer with total value exceeding $200,000 monthly.
However, this success with Heineken did not translate on to other products. Prices just didn’t seem to work. They tried everything Tabasco, Smirnoff Vodka, Hennessy Cognac, Jack Daniels Bourbon, Bacardi Rum, Budweiser Beer, Nescafe Coffee, Marlboro Cigarettes, Camel Cigarettes, etc. They tried both ways, Littleton selling to Bartel or Bartel selling to Littleton. Bartel’s sources were overseas in most cases. They couldn’t find another product to replicate the success and cooperation they seemed to have found with Heineken. There just wasn’t any price discrepancy to profit from.
1998 was coming to a close. 1999 was around the corner. It was getting close to a point where Littleton was losing patience with exchanging prices back and forth. He was getting ready to throw in the towel. Bartel, on the hand, never tired. His business depended upon constant exploration for opportunities and he had learned through years of experience that a new opportunity arises when least expected. He just kept plugging on and on. He didn’t have to wait long until all hell broke loose.
During one of his daily phone calls with his clients, Bartel received a request to deliver Marlboro cigarettes to Miami from overseas. At first, Bartel dismissed this enquiry. How could Marlboro cigarettes come back into USA from overseas? Even if it came to USA from overseas, by the time taxes were paid, it would make the product more expensive than Marlboro already available domestically. So he thought. Bartel knew the Marlboro market and its prices around the world. Prices were quoted per case of 50 cartons. Marlboro is made in several factories owned and operated by Philip Morris or in factories licensed by Philip Morris. It came as a surprise to many people to learn that Marlboro is made on five continents, Asia, Africa, Europe, South/Central America and North America. Most of the product has English text on it with a minor percentage having a local language text on the packs. It is not unusual to see Marlboro with Spanish or Arabic language health warnings on the packets. However, the prices for such products would be lower in the international market when compared to the price for Marlboro that carried the English language text.
Generally, Marlboro prices in the international market ranged between $400 to $450 per case or between $8 and $9 a carton in those days. Most of the product came to the market via ship supply and duty free operators who would sell on the open market to get more volume of the product sold. As they sold more of the product, their supply from Philip Morris could be increased.
Marlboro used to be sold in 40-foot sea containers, known as 40’fcl. Each 40’fcl, or 40-foot-full-container-load, loaded 960 cases or 48,000 cartons. Each case held 50 cartons. So doing the math, one could see that a 40’fcl was worth between $384,000 and $432,000. It was a good chunk of change and the price fluctuation was substantial.
As Bartel dismissed the first enquiry for Marlboro delivery to the USA, he made a note of the client who enquired for this product. Bartel was a man of habit. During his daily calls, which numbered in excess of 60 telephone conversations, he had the habit of jotting down the products and the name of the person who was looking for the product in his handy-dandy notebook. His notebook was a minefield of information and consequently a major source of income for anyone who knew how to decipher the information in that notebook. He didn’t take notes. Just a simple notation that so-and-so was looking for Marlboro. Or that so-and-so had Winston cigarettes to sell. This way, if someone offered him Marlboro, he would immediately know which client was looking for Marlboro and he could easily try and make a deal.
A couple of days later, he received yet another enquiry for Marlboro delivery to Miami. This was too much of a coincidence. Bartel’s instincts were on red alert. There was something happening and he was not a part of it. He knew cigarettes always almost offered a great opportunity for profit. But cigarette trading also required a large financial commitment. That meant the need for deep pockets. He wanted to be on the inside of whatever was going on with this Marlboro to Miami business.
Bartel called a client in the Miami area who dealt in cigarettes. Having spent close to an hour on the phone with this client, Ron sat down at his desk and started to make some notation to himself about prices of Marlboro. He then picked up the phone and called John Littleton of Caravan Shipping in Norfolk. He spent the better part of that morning on the phone with Littleton.
Later that day Littleton called back and asked Bartel to meet him. Littleton went on to suggest that the meeting be in the Metro Miami area. Littleton informed Bartel that he owned a winter home in Ft. Lauderdale and it would be convenient for him to meet in Ft. Lauderdale.
It was a cool evening at the steak house in Ft. Lauderdale on the night of the meeting between the Bartels and Littleton. Ron and Marcia Bartel walked into the restaurant and the hostess informed them that Littleton was already at the table. She showed them both to the table where Littleton was sitting and waiting. He stood up as the Bartels walked up to the table.
Ron and Marcia were both thinking the same thing as they approached and shook hands with Littleton. Littleton was a little man. He was at most maybe five foot four in his black shoes. With graying thinning hair and thick glasses, Littleton seemed more like a college professor than a sophisticated businessman. As they shook hands, Marcia noticed Littleton’s soft sweaty hands and had an instinctive feeling that this Littleton was not exactly a trustworthy partner in business. Bartel was not giv
en to such gut feelings and relied heavily on Marcia’s impressions. It was to be later on as they drove away from their meeting with Littleton that Marcia would make her feelings known to Ron.
The dinner meeting went well. The Bartels and Littleton exchanged a lot of information and a face-to-face meeting always goes a long way in cementing an arrangement that was developed over the phone. Littleton had a little bit of boast in him. He seemed to like that sort of thing. He was free with his words and was rather detailed in his background and of the success he had made of himself. Bartel was not in the same league as Littleton. Bartel was basically brokering deals and rarely ever took possession of his shipments. Littleton, on the other hand, owned and ran a rather large ship supply business where he owned the cargo he had in his own warehouse in Norfolk. He owned his own warehouse and employed over 30 people. Bartel was a lone operator along with his wife and did not employ anyone. Bartel operated from his home office and kept his overhead low and had no business assets besides a couple of computers, a fax machine and printer. Bartel’s business was simple and he used his own funds to transact all the deals. No bank would offer a line of credit without any assets to back him up. His asset was his own cash and that was limited to the extent that he could put down up to $200,000 at any given time for a deal as long as he could recover the funds within 30-45 days and made at least 10-15% profit on it. On the other hand, Littleton had a lavish office and maintained a strong credit line with his bankers that ran into seven figures. Bartel was not even close to Littleton’s league.
Bartel opened up a little about the Marlboro shipments to Miami business. He had garnered more than enough information from his clients to see there was a huge potential for profit. However, the shipments were only going to be possible if someone was willing to put upwards of $380,000 per shipment and wait 30 to 40 days or more to see a return of their investment. The profit margin was immense and it was truly an unbelievable opportunity as Bartel saw it. This was where he saw the need to involve Littleton. Without Littleton’s financial funding ability, this Marlboro project was going to go nowhere unless he found another deep pocketed potential partner. Before he went into finer details, Bartel wanted to set the stage and make sure his impression of Littleton’s financial capabilities was realistic.
God Bless The Person Who Sues My Client - A True Story of Greed and Vengeance Page 2