The FBI is investigating passage of Indiana's 2015 law regulating the e-cigarette industry, which comes as no surprise to owners of vape shops, who have described the law as "crooked" and say it basically gives a few favored companies a monopoly.
“I am more so surprised it took so long for them to call,” said Evan McMahon, chairman of the advocacy group Hoosier Vapers and owner of Liberation Vape shop, in Indianapolis.
Two state senators and McMahon have acknowledged being questioned by the FBI regarding the law, passed as House Bill 1432.
In late August, State Rep. Phil Boots, R-Crawfordsville, told the Indianapolis Star he had been questioned by the FBI if anyone had financially profited from the law. State Sen. Vaneta Becker, R-Evansville, also told the Star she had been interviewed. Both officials declined to comment further to The Times of Northwest Indiana regarding what they knew about the investigation.
McMahon said the FBI questioned him about what he saw in the committee meetings regarding HB 1432.
Hoosier Vapers filed a lawsuit against the state of Indiana in December 2015 to contest the portion of the law that it claims establishes a monopoly for a handful of approved e-cigarette liquids sellers in the state.
“At every committee meeting hearing, if you go to the Statehouse, outside the rooms there’s a railing. And that’s where the lobbyists are,” McMahon said.
“It’s something I encourage all Hoosiers to see. You see what happens in the hearings, but what you don’t see is who is in the hallways coaching these legislators. ... What (the FBI) wanted to know was who the lobbyists and companies were who were out there pushing this bill.”
FBI Supervisory Special Agent Robert Ramsey told The Times the bureau cannot confirm or deny any ongoing investigations.
Signed into law by Trump running-mate Gov. Mike Pence in April 2015, HB 1432 is aimed at regulating e-cigarette liquid production and sales in Indiana, which critics claim may hold health hazards. Proponents say e-cigarettes and liquids are a safe way for people to quit or find an alternative to smoking.
Local lawmakers unaware
State Rep. Julie Olthoff, R-Crown Point, one of four Lake County officials who coauthored HB 1432, said she has not been contacted by the FBI. State Sen. Lonnie Randolph, D-East Chicago, a co-sponsor of the bill, said he was surprised to hear of the investigation and said he has not been contacted by the FBI, either.
"It shocks me; it's unusual for this to happen," Randolph said.
The other Lake County co-authors, Rep. Linda Lawson, D-Hammond; Rep. Charlie Brown-D-Gary; and Rep. William Fine, R-Munster, could not be reached for comment.
The 2015 law mandates e-liquid ingredients to be listed on packaging, requires random testing of products, limits ingredients in e-liquids, and bans sales to minors. It also calls for specific conditions for manufacturing.
Ray Story, CEO of the Tobacco Vapor Electronic Cigarette Association, alleges the law, in addition to establishing a monopoly for select manufacturers, has established a monopoly for one select security company. He said the law is "underhanded" in the way it sets out stipulations for a security firm to "certify that the manufacturer meets certain security requirements."
Some charge law favors one company
Every e-cigarette liquid manufacturer must hire a security firm, and that firm must employ one or more people certified by the International Door Association as a rolling steel fire door technician, and the Door and Hardware Institute as an architectural hardware consultant. And the security company has to have employed these certified persons one year before the regulations took effect in July.
Only one security firm in Indiana met those requirements — a security firm called Mulhaupt's Inc. in Lafayette. Which means if a producer is in California, it would still need to contract with the Indiana firm to continue to sell their products in the shops within the state.
Michael Gibson, a co-owner of Mulhaupt's Inc., is listed as president-elect of the Door and Hardware Institute Board of Governors in a 2015-16 committee listing document.
Some deny knowledge of law's requirements
Doug Mulhaupt, another co-owner of Mulhaupt's Inc., told the Indianapolis Star in June he didn't know until recently that his company was the only one to meet state requirements.
“Mulhaupt’s Inc. follows all guidelines established by the Indiana General Assembly regarding vape security services," Malhaupt stated in an emailed response to a Times inquiry last week.
"Our company works tirelessly to ensure e-liquid products are safe for consumers, continuing Mulhaupt’s 140-year tradition of protecting Hoosiers.”
Todd Thomas, managing director of the International Doors Association, said he has "no earthly idea" how and why these specific certifications became mandated in the law. Thomas became aware of HB 1432 as vape liquid producers contacted his organization with questions.
"The only thing I want the people of Indiana to know, is that we were not involved with this bill, had we been aware, we would have opposed this monopoly," Thomas said.
"We want more public safety, not less, and this does not do anything to increase safety in our industry. ... There's no incentive for public safety and there is nothing in the bill that supports more rolling steel fire door use safety."
Thomas said that whoever wrote the bill "knew nothing about this industry" and added he doesn't even know if the companies currently serviced by Mulhaupt's Inc. even have rolling steel fire doors, though he can't say for sure.
But Story, of the Tobacco Vapor Electronic Cigarette Association, argued that "the only way something like this happens is when there's corruption."
Goodcat LLC, an e-cigarette liquid manufacturer based out of Naples, Florida, took its case against HB 1432 to court this summer because of the restrictions it placed on the company when it supplies Indiana vape shops. Judge Richard Young of the U.S. District Court for the Southern District of Indiana issued a key ruling that has allowed the company's lawsuit to proceed.
"To take away from the decision of Judge Young, it was concluded that there is reasonable likelihood that HB 1432 violates the dormant commerce clause, as it discriminates against non-Indiana e-liquid producers," said Eric Heyer, an attorney for Goodcat LLC.
Heyer said they are currently conducting their own investigation via civil litigation, which is now in the discovery phase. The next step for them is serving third-party subpoenas.
McMahon, of Hoosier Vapors, said in the end, the law was a solution for a problem that didn’t exist, as there were zero documented instances of e-juice poisoning in Indiana.
Now as vape shops across the state see prices for e-cigarette liquids rising, many Indiana e-cigarette users are turning to purchasing their e-juices online.
“It actually created a thriving black market in Indiana,” McMahon said. “The ‘Wild West’ they warned about in the beginning, they ended up creating, hurting small businesses in Indiana as a consequence.”
McMahon said he estimates anywhere from 40 to 80 vape shops have had to close their doors as a result or, like him, had to move their business out of Indiana to stay open.
“Would it make people feel better if people went to jail, and the law was fixed?” McMahon said.
“It may feel like some justice has been done. But there’s no way to get back that lost money, that lost time fighting it. They took away these people’s American dreams. No apology will make up for what happened. … Even if no one broke the law, they violated the spirit of the law and the public trust.”