June 13, 2010 - A one-year investigation that unwound a multimillion-dollar smuggling ring, according to an affidavit by ATF Special Agent Christopher Scott unsealed in Norfolk yesterday, June 10th.
On Wednesday,June 9th much of the Norfolk, Virginia field office of the U.S. Bureau of Alcohol, Tobacco, Firearms (ATF) and Explosives fanned out across northern New Jersey and New York with other agents, serving the warrants and doing the searches that wrapped up the case, said Teresa Merhige, the ATF resident agent in charge in Norfolk.
They arrested six men and women in addition to the restaurant owner and his daughter.
The eight allegedly had formed two crime rings, one based in New York and New Jersey, the other in North Carolina, that paid more than $4 million for cigarettes on which no state taxes were paid.
The rings also sold to the ATF agents counterfeit postage stamps, counterfeit tax stamps and counterfeit consumer goods ranging from Coach and Louis Vuitton handbags and shoes to fake U.S.-brand-name cigarettes. Ring members sent several of the counterfeit goods shipments to a UPS Store in Chester for the undercover agents.
The alleged smugglers were persistent, the affidavit noted. Last summer, within minutes of deputies in Worcester County, Md., stopping one of the alleged ring members with 209 cartons of contraband cigarettes in his car, Zhang phoned an ATF agent asking to meet to buy more.
The groups allegedly had been buying cigarettes from Eastern Shore retailers and taking them north, to take advantage of the difference in state taxes, when they approached the ATF undercover agents, who werEarlier this week, an unrelated investigation by state and federal authorities resulted in warrants being served at seven Hampton, VA businesses suspected of illegal tobacco sales.
The money can be big -- Virginia's cigarette tax rate is 30 cents a pack, compared with $2.70 in New Jersey, $2.75 in New York state and $4.25 in New York City. Smugglers buy cigarettes in low-tax states, disguise them with bogus tax stamps, sell them in corresponding high-tax locales, and pocket the difference. A $2.70 spread separates Virginia's 30-cent-per-pack cigarette tax and Connecticut's at $3.00. Driving 1,500 cigarette cartons (10 packs per carton) from Arlington to Hartford yields $40,500 per trip.
Criminal organizations use cigarette smuggling as a means to raise money. Terrorists move cigarettes because they are light, portable, otherwise legal, and produce cash. Consider the first attack (1993 World Trade Center bombing) on the Twin Towers, which killed six and injured 1,040. As Patrick Fleenor recalled in a Cato Institute study, "counterfeit cigarette tax stamps were found in an apartment used by members of the Egyptian Islamic Jihad cell that carried out the 1993 bombing of the World Trade Center." More: Cigarette Smugglers in St. Louis, New York City, Charlotte and Tampa Funnel Money to Terror Groups like Hezbollah by BILL WARNER, Zimbio.com, 3/27/2009.
Earlier this week, an unrelated investigation by state and federal authorities resulted in warrants being served at seven Hampton businesses suspected of illegal tobacco sales.
References: Norfolk ATF helps bust alleged cigarette-smuggling ring by David Ress, Richmond Times-Dispatch, 6/11/2010; Tobacco taxes finance terrorism by Deroy Murdock, Scripps Howard News Service, 6/7/2010.
A few related news briefs:
South Carolina - low cigarette pricing, smuggling, higher insurance premiums, etc..;
Rhode Island - c-store, another case of selling cigarettes that lack state tax stamp..;
Rhode Island retailers finding ways to avoid paying tobacco tax...