FBI probing for possible corruption in vaping law

August 23, 2016

The FBI is probing whether any illegal activity led to the creation and passage of Indiana’s contentious new vaping law.

State Sen. Phil Boots, a Crawfordsville Republican, told IBJ he spoke with an FBI agent about the law more than a month ago.

And Evan McMahon, who runs an advocacy group that had opposed the law, also told IBJ he talked to an FBI agent “a week or so ago.” He said they had an in-depth conversation about the law’s origination in 2015 and 2016.

Other sources have privately acknowledged the FBI's interest in the law as well but declined to comment.

The agent "said they were investigating it,” McMahon told IBJ. “They were looking at possible anti-trust and corruption (violations). He wasn’t just poking around.”

But Boots, who opposed the law, said “it was made clear to me this was just a discussion,” not an official investigation.

He said he was asked by the agent whether he had any knowledge of any lawmaker or other person “benefitting from this,” financially or otherwise. He said he did not.

"I don't have any reason to believe [the law's passage] wasn’t all on the up and up,” Boots said. "I just didn’t agree with the way it went down.”

FBI spokeswoman Cathy Burton would not confirm whether the bureau was looking into the law, which dramatically reduced the number of players in Indiana’s vaping industry and effectively created a monopoly. “My official statement is we can’t confirm or deny the existence of an investigation,” Burton told IBJ.

The law established security firm requirements that it said were intended to protect manufactured product—e-liquids for use in electronic cigarettes—from tampering.

But instead the legislature’s rules for which firms qualified to be security companies essentially closed the market to just one firm—Lafayette-based Mulhaupt’s—by requiring that firms had already obtained certifications from certain trade groups. One of those trade groups is run by Mulhaupt’s CEO. And the law was championed by a Lafayette lawmaker, state Sen. Ron Alting.

And because no manufacturer is allowed to sell its products in Indiana without an approved security firm, Mulhaupt's gained control over who was in and who was out of the state's e-liquids market.

The FBI probe comes as a federal judge on Friday granting a preliminary injunction to a Florida e-liquid manufacturer, GoodCat LLC, saying that the security firm requirements were likely to violate the dormant commerce clause of the U.S. Constitution.

Boots' comments on Monday come despite a statement that an Indiana Senate spokesperson gave IBJ earlier this month when questioned about a possible FBI probe.

Skip Brown, spokesman for Senate Pro Tem David Long, told IBJ that Long “isn’t aware of any contact by the FBI on any issue, vaping or otherwise.”

Some lawmakers did not outright deny that they had been contacted by the FBI about the law.

State Sen. Vaneta Becker of Evansville, who opposed the law, told IBJ she would “rather not say” if she had spoken to the FBI.

State Rep. Kevin Mahan, who supported the law, told IBJ he had “talked to several different people about the bill, from legislators to reporters to any inquiring minds.”

“I’ll leave the FBI up to talk about what they’re investigating or not investigating,” Mahan said. “I have absolutely nothing to hide, whether I’m talking to you, the FBI, (or) legislative leadership."

State Sen. Carlin Yoder of Middlebury, a sponsor of the law, told IBJ he had not been contacted.


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