Blog Archive

Rich Marianos

Apparent Robbery Gone Bad Leads to Tobacco Trafficking Offender

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosive
s

Last week, local, state and federal authorities arrested Merysol Mendez-Reyes of Newark, N.J., following a reported carjacking and shots fired call.  

Upon further investigation, authorities uncovered that Mendez-Reyes, first reported as a victim of attempted carjacking in this case, was involved in a scheme to traffic over 75,000 counterfeit tobacco stamps, along with 400 cartons of cigarettes from Virginia.
 
Mendez-Reyes was charged with seven counts related to having counterfeit stamps, contraband cigarettes, and distribution of the items. 
Congratulations to law enforcement officials for a job well done.
 
Find the original article here.

Two Queens, New York men arrested and charged with criminal cigarette trafficking

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosive
s

Two men from Maspeth and Middle Village, New York are facing jail time for having almost one million illegal cigarettes in their possession, according to court documents and a press release from the Queens District Attorney. The defendants are identified as Ling F. Shi, 27, of 52nd Road in Maspeth, and He M. Wang, 46, of Dry Harbor Road in Middle Village.

Further information in these documents explained that police executed a search warrant on Monday, May 16, on a house located at 90-47 51st Avenue, Elmhurst, New York where they allegedly found more than 3,594 cartons of cigarettes, containing more than 700,000 individual cigarettes in the basement.  From this, additional search warrants were obtained for a 2015 Honda registered to Shi, which allegedly uncovered roughly 150 cartons that contained more than 30,000 individual cigarettes.  Also uncovered at this time were receipts for two storage units at the Stop and Store facility at 74-04 Grand Ave.
 
Upon obtaining a third search warrant for the storage units, police found 62 cartons, containing 12,400 individual cigarettes from one storage bin and another 1,094 cartons containing 218,800 individual cigarettes from the second bin.
 
Ok…Here comes the big surprise…………………………..
 
None of the cigarettes seized from the house, car or storage facility were in packs that had a New York State cigarette tax stamp.
 
According to Queens District Attorney Robert Brown, “The illegal sale of untaxed cigarettes is a million dollar industry — a business venture that cheats the city and state out of much-needed revenue. Schemes, like the one alleged here, mean every taxpayer must dig deeper to pay higher taxes. Each stamp on a legal pack of cigarettes represents both excise and sales tax that would have been paid to both New York State and New York City. The cigarettes allegedly seized in this case did not have the proper tax stamp.”
 
Shi and Wang were both arraigned in Queens Criminal Court and charged with violating the state’s cigarette and tobacco products tax law and fifth-degree conspiracy. If convicted, the defendants face up to seven years in prison.
 

Is Criminal Tobacco trafficking profitable? Just ask Derek…………….

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosive
s

Quebec:

Last month, NASCAR driver Derek White was arrested for his alleged connections to the largest tobacco product smuggling operation in North American history.
 
White, 45, is believed by authorities to be a high ranking member of this smuggling operation.  The smugglers used Interstate 95, “The New Tobacco Road,” to obtain tobacco products from North Carolina and illegally traffic them north to Canada. The profits from the illicit sales were then used to purchase cocaine according to police.
 
The investigation, which began in 2014, identified more than 65 locations in both Ontario and Quebec, and involved over 700 law enforcement officers - both Canadian and US.
 
According to law enforcement, 52,800 kilograms of tobacco, 836 kilograms of cocaine, 21 kilograms of methamphetamine and 35 pounds of marijuana were seized.
 
Nearly 60 arrests were made in all.
 
So, who says organized crime has no interest in smuggling tobacco products? The evidence, which in this case is more than 1600 pounds of cocaine, tells us that drug cartels do.

Midwest trafficking corridors begin to open up

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosive
s

St. Louis:

The lucrative criminal enterprise of smuggling cigarettes appears to be expanding its territory outside of the I-95 corridor as evidenced by the following indictment involving the Mid-West region of the country.
 
Fourteen people were recently indicted, accused of a “large-scale multi-million dollar” conspiracy to smuggle cigarettes from low tax states such as Missouri and Georgia to sell in New York state.
 
The indictment alleges that the conspirators purchased cigarettes in the low tax areas of St. Louis and St. Louis County where taxes range from .22 to .24 cents per pack in comparison to New York where state and local taxes are almost $6 dollars per pack.
 
This specific scheme is reported to have defrauded New York of over $20 million dollars in tax revenue. According to court documents the individuals involved in this conspiracy were from the New York, Missouri and Atlanta areas. 
 
This is further proof of what I have been saying for many years now: The “New Tobacco Road” spans from Main Street all the way to Wall Street, and every state in the nation may be affected by illicit tobacco smuggling along the way.
 
 
http://www.stltoday.com/news/local/crime-and-courts/feds-missouri-new-york-cigarette-smuggling-ring-dodged-million-in/article_006660a9-4c5d-5377-b808-1a38cd76f9e8.html

Multi state Conspiracy busted by Narcotics Task Force

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosive
s

Northern Virginia:

 
Trafficking contraband cigarettes, conspiracy, and witness tampering are the charges facing two Jordanian citizens after they were arrested in New Jersey this week for defrauding the Commonwealth of Virginia of over 9.5 million dollars.
 
Laila Alayat, along with her partner Eyad Salahedin, were arrested by members of a Northern Virginia Narcotics Task Force working in conjunction with investigators from the New Jersey Tax Administration.
 
The scam uncovered was a simple one; buy cigarettes in Virginia under a fraudulent business license and pay zero Virginia tax. The  partners then sell these cigarettes in northern states along Interstate I-95 and make millions.
 
What this criminal enterprise did not bargain for was their operations, using tobacco as a commodity in a black market exchange, being caught on the radar of a narcotics task force.
 

Tobacco crimes being committed by “organized criminals” connected to drug crimes, wow, I’ve heard that before…………

http://www.richmond.com/news/virginia/article_ceb1492b-3d20-5460-a83b-a41285192b34.html 

Mainstream media is starting to catch on

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives

Routinely I search the Internet and various news outlets looking for work being conducted by law enforcement, demonstrating the importance of the issue of criminal tobacco trafficking. 

During my search in recent weeks, I was pleasantly surprised to read the following opinion/editorial piece that was published in The Daily Progress in Charlottesville, VA.  
 
The problems identified in this editorial are the same issues I have been discussing on “The New Tobacco Road” for the last several years. It’s good to see some mainstream media outlets are starting to take notice.
 
Read on:
 
Organized crime has long profited from black-market deals in prohibited or expensively regulated goods — ranging from bootlegged liquor, to prostitutes, to guns. Organized terrorism has taken a cue from that history.
 
And Virginia has long been a popular state for those who deal in illegal goods, including, in modern times, sex trafficking and weapons. Our interstates facilitate movement of goods east-west and north-south; Interstate 95 is an especially busy corridor for smugglers. And our sea ports and airports allow international access; cigarettes are easy to transport.
 
Virginia also is popular with cigarette smugglers because our taxes on tobacco are relatively low. Smugglers can buy cigarettes here and resell them elsewhere at a substantial profit.
 
That profit falls into the pockets both of organized crime and of terrorism, says a new State Department report. The same groups that deal in cigarette smuggling — often groups of foreign nationals, the report says — also are linked to weapons smuggling and sex trafficking.
 
Governments must be concerned not only about where the money is going, but about where it isn’t going.
 
When smuggled cigarettes are sold at lower prices, circumventing taxation, then governments are robbed of income. The State Department estimates that cigarette smuggling is costing state and local governments $3 billion to $7 billion each year.
Virginia is losing revenue, too, even though cigarettes are being purchased here for resale elsewhere. Virginia allows businesses with high-volume sales to obtain certificates releasing them from sales tax payments. Smugglers are setting up fake businesses and fraudulently obtaining tax-exempt status.
 
There’s another danger. Virginia’s State Crime Commission recently was told that a robbery related to cigarette trafficking earlier this year erupted into gunfire, with several shots fired at a shopping center. Innocent people risk being caught in the middle of such wars.
 
For all these reasons, state and national governments must crack down on smuggling.
 
Earlier this year, the General Assembly even refused to authorize the Alcohol Beverage Control Board to conduct background checks on entities applying for tax-exemption certificates. Given ABC’s record of problems, perhaps that was justified.
But background checks should be conducted by someone.
Also, punishments for smuggling are too soft, providing little deterrent.
Worldwide, cigarette smuggling costs governments $40 billion to $50 billion annually.
 
How much of that is making its way into the hands of terrorists?
 

Whatever it is, it’s too much. Richmond and Washington cannot afford a lax response to what turns out to be a very serious problem.”

 

Teacher, Cigarette Smuggler…Gun Runner

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives

New York state of mind: In early November, a Bronx, NY judge sentenced an ex-teacher from a prestigious New York City school to 15 years in prison after he admitted to dealing military-grade weapons.

Theophilus Burroughs, 54, was busted after a year-long probe by the Bronx District Attorney’s office and the NY State Department of Taxation and Finance. During the course of the undercover investigation, Burroughs traded nearly 30,000 cases of cigarettes, narcotics, and purported military-grade equipment, with the belief that some was for barter to criminals overseas.

Burroughs originally agreed to a ten year sentence, but the judge in the case, The Honorable Ralph Fabrizio, added an additional five years due to Burroughs lack of remorse for his crimes.

Congratulations to the State of New York for a job well done.

http://www.nydailynews.com/new-york/ex-teacher-15-years-selling-weapons-terrorists-article-1.2424815

Big Box goes after big smugglers: COSTCO warns bulk cigarette traffickers

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives

Kudos to the big box wholesale retailer Costco posting new signs in its Virginia stores that require tobacco purchasers show additional ID, complete IRS forms for cash purchases over three thousand dollars and provide their license plate of the vehicle used to transport the purchase.
The signs went up after an NBC News story about the dedicated work from Virginia tax officials revealed how cigarette traffickers buy cigarettes from stores like Costco and Sam’s Club and sell them on the black market.
Check out the link below as undercover cameras caught alleged smugglers buying large loads of cigarettes at one time. Some spent tens of thousands of dollars in cash, and bought so many cases of cigarettes that they needed help wheeling the cartloads out of the store. The buyers said they represented legitimate businesses, and listed business addresses, some of which the investigators traced back to a private home and a vacant lot.
Costco and other retailers that sell cigarettes can make a difference in the fight against tobacco smuggling by cutting off supplies to would-be crooks. They should be applauded for engaging in this issue in a way that will help the communities in which they do business.

http://www.nbcwashington.com/investigations/Costco-Makes-it-Clear-Bulk-Cigarette-Buys-to-Be-Scrutinized-318507661.html ​

Crime doesn’t pay. Or does it?

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives

Some novel thinking has emerged in Washington state that turns the old “crime doesn’t pay” adage on its head in a way that is helping solve the problem of tobacco smuggling, while supporting cancer research.
 
The Governor and State Legislature of Washington should be commended for a new law that uses the fines/penalties generated from illicit tobacco enforcement efforts to support a Washington cancer research endowment as part of a $10 million funding match from the State.  It’s a big win for the State, as an important research institution maintains its funding after losing Federal grant money. It’s a win for local communities because the criminals will quickly learn the cost of smuggling tobacco just went up in Washington State.
 
What is so smart about this idea is that it doesn’t make the problem worse by using a massive tobacco tax increase to fund local projects; this plan makes crooks pay for their crime in a way that will have a long-term benefit to Washington’s citizens, and give a boost to law enforcement. Cops like it when crooks are brought to justice and this new law does exactly that.
 
Washington’s different approach means better enforcement, less crime, more revenue, and no tax increase. This is a model for good government in the face of a major criminal challenge impacting local communities all across America.

It’s about time! (Plea hearing set for alleged cigarette trafficking figure)

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives

This article (linked below) is exactly the equation I have been referring to since the launch of “The New Tobacco Road” website.
 
ARREST + SWIFT TIMELY PROSECUTION = DETERENCE
 
Earlier this quarter I wrote about Maher Mustafa robbing the United States of over $20 million dollars in cigarette taxes.  Mustafa has entered a plea agreement to go to jail… will not pass go… and will not collect $200.
 
The Eastern District of Virginia is applying the formula above, and I predict it will deliver results.  Current and future cigarette traffickers will have to think twice before loading up a truck and shipping contraband cigarettes to New York. This approach can be effective if the penalties are tough and the enforcement consistent and swift.
 
After less than six weeks of work by the U.S. Attorney’s office, a crook who smuggled massive amounts of cigarettes is getting 10 years behind bars.  This is real law enforcement.
 
 
 

Smugglers to Law Enforcement: Catch Me If You Can

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives
What's worse than a criminal breaking the law? A criminal who has no fear of the law.
 
Because tobacco smuggling is too often seen as a victimless crime, laws to fight smuggling are weak and penalties, minor. 
 
The crooks know this, and even enjoy rubbing this weakness into the face of law enforcement.
 
Last April, in the Eastern District of Virginia, Maher Mustafa was charged with failing to file a federal form required for cash transactions greater than $10,000.  According to government sources, Mustafa failed to file over 350 transactions involving over $20 million dollars.
 
Mustafa, the government alleges, was selling large amounts of cigarettes to a shell business, illicitly trafficking them out of Virginia to high-tax states, like New York.
 
When authorities executed a warrant to search his safe deposit box, they found a note composed by this Jordanian Shakespeare in the otherwise empty box:
 
"Dear Agent...Good luck.  Try to be faster and smarter next time.  Have a good day."
 
In court, agents testified that the 10-inch-by-10-inch box had been opened only once by Mustafa, on the day he rented it. On April 16, Mustafa obtained a cashier's check for $30,000 made out to himself using funds from his business account. All while under the watchful eye of state and Federal officials.
 
I'm not a mind reader, or the all seeing "Carnac the Magnificent" played by the late great Johnny Carson, but it’s pretty clear that Mustafa was acting without fear of law enforcement. The crooks will continue to flagrantly break the law -- and steal much needed tax revenues -- until the laws are strengthened enough to make criminals look for another line of work.  
 
Virginia and other states are getting tough on tobacco smuggling.  It’s time for the Eastern District of Virginia and other communities to aggressively use the new tools they now have to fight this crime.  If government doesn't use the hammer in their hand, Mustafa and his kind will continue to thumb their noses at the law, laughing at little, if any, threat of jail time and dwindling enforcement, all the way to the bank.
 

“At last! The Feds can spell T-O-B-A-C-C-O.”

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives
From FBI reports
 
DATELINE: ST. LOUIS, MO
 
“An indictment was unsealed late yesterday charging the following ten Chicago people involving a conspiracy to buy State of Missouri tax stamped cigarettes and transporting them to Illinois for resale. According to the indictment, between October 2012 and April 2015, the defendants purchased large amounts of State of Missouri tax stamped cigarettes in the St. Louis, Missouri area, from either a confidential informant or retail business, which they then transported to the Chicago area for resale.
 
The indictment alleges that they then sold the contraband cigarettes themselves or to local distributors. The defendant’s made a profit at the expense of millions of dollars of lost tax revenue for the State of Illinois. Indicted: Mohamad Awadallah, 24; Khalid Alazzah, 33; Ibrahim Moghli, 32; Baraa Awwad, 25; Wisam Zeidan, 25; Ahmad Zayed, 36; Raad Hamdeh, 29; Suhaib Awwad, 22; Muath Salah, 24; and Yazan Alsala Ymeh, 24. Each defendant was indicted by a federal grand jury April 8th on one felony count of conspiracy to traffic in contraband cigarettes.”
 
 
For months now I’ve been publically calling out the Department of Justice for its woeful lack of criminal tobacco prosecutions. The public welfare has been put at risk, and communities around the country are losing billions of dollars to the growing criminal enterprise built on cigarette smuggling.
 
But recently, I’m seeing a change for the better.  The case in Missouri and Illinois cited above is just one example of how The New Tobacco Road mindset has spread to the heartland of America.  Kudos to the FBI for doing what was needed to stop the flow of cash to criminal conspiracies; may the agency continue to throw these crooks behind bars.
 
In some jurisdictions, United States Attorneys are at last “wising up” to this real and growing crisis – and it is a crisis when 60 percent of cigarettes sold, such as in New York, are illegal.
 
In New York, Chicago, and Boston, the Feds have finally begun looking into how  organized crime uses tobacco to fund its many other criminal activities – money laundering, arms trade, and in some instances, terrorism.
 
Keep watching, and urge your local law enforcement and government officials to press for more action on this front.  Share some of the articles and information here at www.thenewtobaccoroad.com.
 
Apparently the government is getting the message, but we need to keep the drumbeat loud and strong for tougher laws and more enforcement resources – particularly at the Federal level.
 
But be advised, DOJ, time is of the essence; this year’s $10 billion dollar revenue loss shouldn’t need to grow to $20 billion for you to engage in a full-court press against this crime.
 
A lot of good work is being done out there; Washington needs to step it up.

“Minimum Legal Age and Tobacco Bootlegging”

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives
American teens are smoking less than ever before, but it’s amazing how some experts still don't see the threat created by the explosion of illegal tobacco trade along The New Tobacco Road.
 
A recently released report by the Institute of Medicine (IOM) on raising the minimum age to purchase tobacco products (MLA) downplays the impact of illegal trade, yet given that most underage smokers obtain cigarettes from "social sources" -- the report said -- it's clear that black market trade can reach our youth.
 
I'm amazed that experts with no law enforcement experience will advocate for higher taxes and minimum ages, but continue to downplay the real outcome of illegal trade: lower prices and unfettered access to tobacco.  
 
The report states that underage sales in 2013 were 9.6% nationwide.  That’s based upon sales data [emphasis added].  When there is an illegal market of nearly 60% as in New York State, it is not known how much product is getting into the hands of kids.
 
It is well-known that crooks don't care about the rules, the law, or our children. They care about the profits they reap from illegal tobacco trade.
 
If the experts state that price is a key factor affecting youth smoking rates, then it's pretty clear that heavily discounted, illegally sold cigarettes work against youth tobacco prevention and control efforts. 
 
If "social sources" -- friends, adults, strangers -- are the primary source for tobacco for underage smokers, that gray supply chain is no doubt getting supplied by the black market.  There is no evidence, as the report said, that restrictions on "non-commercial distribution to minors are being enforced..." There is no enforcement in the bootleg market that is growing along I-95 and along other Tobacco Roads emerging around the country.  "There is little information available on the frequency of youth purchase on the illegal market," the report added.
 
The report suggests raising the minimum age to purchase tobacco won't create a black market. That's not the point; the black market is here and growing. Whether the age of purchase is 18 or 21, governments should not pass additional restrictions unless they also are willing to dedicate the resources necessary for effective enforcement.
 
Illegal tobacco trade is a real threat to our children, our communities.  The IOM report ominously suggests that if a higher MLA did create a black market with "street dealers" and associated violence...," the policy significance of an emerging black market in tobacco on the streets or in communities goes way beyond the limited task undertaken here."
 
In my opinion, we're already there, folks.

“Evidence, Not Spin”

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives

As I have said before, I’m a cop.
 
Not a tax expert. Not a regulator.
 
A cop.
 
Decades of law enforcement experience have taught me to observe, follow the evidence, and to exercise good judgment when fighting crime and protecting the public safety.
 
That is why when those who have no law enforcement expertise claim something different than what I am seeing and hearing from law enforcement professionals, I feel obligated to speak out.
 
I get angry when I see government spin, not facts.
 
A recent press release cited a study funded by the federal government that said, “Available Evidence Suggests (emphasis added) That Possible Regulation of Cigarettes Not Likely to Significantly Change U.S. Illicit Tobacco Market.”
 
The report rests upon a three-year-old GAO study, whose authors apparently never engaged anyone from the law enforcement community.  It seems they also never examined any new criminal patterns, never interviewed any informants or those engaged in the criminal business, never weighed any new policy changes … and the list could continue.
 
To my astonishment and that of others in law enforcement, the report is being used to suggest the problem of tobacco bootlegging isn’t that bad.
 
Really?
 
Explain that to the states along The New Tobacco Road, where tobacco smuggling is rampant.
 
Explain that position to the states of Virginia and Rhode Island, which have passed tough new laws to fight the growing crime problem associated with illegal cigarette trade.
 
Explain that position to the State of Massachusetts, whose report on tobacco smuggling points to a major problem in that state.
 
Explain that position to the State of New York, where 56 percent of the tobacco trade is illegal.
 
The report is a product of 15 professors and researchers who have no law enforcement experience, zero arrests to their credit, zero seizures, zero prosecutions, zero criminal interviews, zero informants, and most importantly,  apparently no rigorous evaluation of available evidence.
 
And here is where the clever spin hides the true agenda of the report, and stands as a sad example of how our government is ignoring this problem at its own risk and that of its citizens:
 
The report speaks of “possible regulation” – regulation is likely to mean excise taxes, which we know have turned New York City into an organized crime funding machine.  And how “regulation” (taxes) are "not likely" to contribute to tobacco smuggling when widely disparate price differentials (taxes) between the states is clearly the cause of the problem in the first place.
 
The evidence is clear. This group simply didn’t want the facts to get in the way of their point of view on taxes, and doesn't care about criminal culture forming around tobacco smuggling.
 
Illegal tobacco trade is a major crime problem in the United States. It’s rampant, and growing beyond The New Tobacco Road. Some states are showing leadership in passing tough laws and providing more resources to law enforcement. New Jersey is an example of a state that is fighting back hard.
 
To say tobacco smuggling isn’t a problem is ignoring the evidence.  As a cop, I’ll take the evidence over a study any day.

“Something should be done about the nation’s rampant smuggling problem.
 
Mackinac Center for Public Policy 2015

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives
When the academics and the law enforcement officials share the same thoughts and speak the same language, the policy makers need to take notice and act.
 
Such is the case with the 2015 study just released by the Mackinac Center for Public Policy, pointing to the continued flood of tobacco smuggling along I-95, The New Tobacco Road. And now, there has been an eruption of smuggling in the Chicago and St. Louis area where local jurisdictions have slapped new, huge tax levies on cigarettes.
 
The Mackinac data is clear: exorbitant increases in tobacco taxes on the part of state and local governments create crime.
 
This isn't pontification on my part; it’s the reality of what is happening in America, not only along The New Tobacco Road, but in other regions of the country.  Tobacco smuggling is good business for crooks, and it’s getting better.
 
Im not a tax guy, Im a cop.  But, do the math.
 
When a state is charging ten times the price for a pack of cigarettes than other states or jurisdictions, the demand is created and the criminals move in to make money.  The formula is exactly the same for illegal trafficking of any kind.  And for cigarettes, it is without the risk of any real jail time or financial penalties.
 
This is not just theory. Its reality and this study supports what tobacco investigators have been stating nationwide for years:  Contraband tobacco is a commodity for criminals and this activity is getting worse year by year.
 
What’s more worrisome is, each year more law enforcement organizations take a bigger step away from these crimes because of lack of funding, lack of leadership, or lack of political support. Yet the risks are great.
 
One excerpt from the study:
 
“In 2013, the In Amenas hostage crisis in Algeria (which resulted in 39 foreign-born hostages being killed) was led by an al-Qaeda-associated terror group led by Mokhtar Belmokhtar, sometimes known as “Mr. Marlboro” for his large-scale cigarette smuggling operation.”
 
You remember al-Qaeda. They just took credit for training the terrorists involved in the Paris siege that shocked the world.  Connect the dots.  Investigations nationwide have clearly shown that contraband tobacco trafficking is a major way terror cells are funding their operations.
 
The Mackinac Study demonstrates that smuggling is not going away; in fact it’s spreading. Local leaders and law enforcement need to look at the bigger picture, and the cold hard facts.  If they don't, every Main Street in America will be part of The New Tobacco Road.
 
This year there will be opportunities for states to pass tougher laws and provide law enforcement more resources to fight this crime.  Our policy-makers, local leaders, and police need to put public safety first.
 

Addressing the “High-Value Criminal Targets” in 2015

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives
“Isn’t tobacco trafficking a victimless crime?”
 
“Why should Virginia engage on this if tobacco products are being smuggled outside its jurisdiction?”
 
“Is some trafficking acceptable if the overall smoking rate is declining?”
 
“Where is the Department of Justice in helping us combat a multi-state and international criminal enterprise?”
 
These are all questions I’ve heard during the last year as I’ve conducted multiple presentations to law enforcement officials, political leaders, the media and business executives about the explosion of tobacco trafficking along the I-95 corridor.
 
What I don’t hear as much anymore is “why should I care?”
 
There is growing interest and concern about the expanding criminal activities along the “New Tobacco Road” as more and more state and local leaders are becoming aware of what law enforcement has seen for some time: the transformation of illicit cigarettes into the currency of organized crime.
 
On every occasion I’ve forcefully argued one critical point:
 
At the top of the criminal pyramid, organized crime, narcotics traffickers, street gangs and terrorists are behind almost every tobacco smuggling scheme. We are not talking about Uncle Joe looking to save a few bucks on cheap smokes. Cigarette smuggling is now big business for large-scale, professional criminals.  We need to focus on the head of this violent serpent.
 
As awareness has grown, Rhode Island, Massachusetts, New York, Virginia, and New Jersey have taken new, aggressive efforts to tackle these “high-value criminal targets” through the enactment of new laws, formation of governmental and law enforcement task forces, and the development of new partnerships.
 
We need more cities and states along The New Tobacco Road to join this growing effort, and contribute their expertise and resources. I will continue my efforts to sound the alarm and expand the circle of concerned leaders.
 
Daily, partnerships have been established among scores of state legislators, police, industry representatives and the media to bring this problem and the effort to fight tobacco smuggling to light. Now that the table has been set, our New Year’s resolution will be to focus strategically on the “High-Value Targets” that are controlling the vast majority of the smuggling operations.
 
Hopefully, more States along I-95 will begin to debate and pass tough new laws and provide more resources to law enforcement.  Local communities’ leaders need to be engaged and made aware that tobacco trafficking is bringing violent crime to Main Street.  The Federal government needs to come off the sidelines and engage on this issue as well, as it’s not just a state problem. 
 
On January 1, 2015, The New Tobacco Road Cost Clock at www.thenewtobccoroad.com will be set to zero, and we will start another march toward over $5 billion in annual losses of revenues to the States, while the bad guys deepen their hold on tobacco smuggling.    The foundation has been set to focus on the top of the criminal food chain in 2015, and disrupt these operations before they become further entrenched in our communities, and bring more violent crime to your neighborhood.
 
 

Honest Convenience Store Owners: The latest victims in battle against contraband cigarettes along The New Tobacco Road

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives
This week, when you stop at your neighborhood convenience store to pick up a gallon of milk, fill the tank, or grab some chips, take a moment to reflect on this: your corner store is under attack from organized criminals trafficking cigarettes up and down the East Coast.
 
The vast majority of tobacco sales occur at convenience stores, putting these small businesses on the front line against cigarette smuggling rings growing along I-95. Cigarette sales often represent a significant portion of an owner’s revenue.
 
Contraband tobacco can cripple a law abiding shop owner's business.  It steals legal sales away, resulting in lost tax revenue for the state and profits to run the shop.  Non-tobacco sales are hurt as customers who would also buy a drink, gas, or other items disappear.
 
Smuggling is having a corrosive effect on stores up and down The New Tobacco Road.  As more and more people find new way to purchase cigarettes illegally and cheaper off the black market, a few legitimate business are even tempted to “fudge the books” in order to compete.  Some shop owners are being forced into the arms of organized criminals to purchase tobacco at a lower rate to sell discreetly behind the counter, making a legitimate owner now a partner in crime in order to save his or her business.
 
“If youre an honest retailer, youve got a lot to lose,” says Jeff Smith III, an industry leader who represents the Virginia Wholesale Distributors Association.  With some contraband tobacco levels sitting at 60 percent of the market in cities and states along the I-95 corridor, he couldn't be more accurate.
 
Retailers can’t compete with criminals selling smuggled or counterfeit cartons of cigarettes for $20 a carton along the eastern seaboard in some places,” he says.
 
The end result is that a convenience store folds, taking the convenience away from you and me. Or worse, an honest retailer has to resort to selling smuggled products to stay in business. Either way, there goes the neighborhood.
 

“Surprise! New York’s smoking rates are increasing, but no one blames the crooks”

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives
I recently was reading the Wall Street Journal and came upon the following.
 
“New York City’s adult smoking rate increased to 16.1% in 2013, up from a low of 14% in 2010. Advocates and health officials are blaming the rise on a steady drop in funding for anti-tobacco programs.”
 
In a perfect world, we would throw in a number or a point of comparison to suggest that NYC spends more than other localities that didn’t see a rise, then pivot to 3 facts that tell you everything you need to know:
 
1) NYC has the highest cigarette taxes;
2) New York State has the largest number of unregistered cigarette manufacturers; and
3) Over half of all of NYC cigarettes are smuggled.
 
Take it from there.
 
And the NY health officials are blaming anti-tobacco programs?  It’s time for health officials to pause and listen to their law enforcement officers. 
 
Each year, investigative experts estimate that between 50% and 60% of all cigarettes smoked in New York City are trafficked via the black market. Smokers are spending less for illegal contraband cigarettes than ever before, clearly going out of their way to avoid paying for the most expensive packs in America, making it easier to light up.
 
Memo to Health Officials: How about the novel concept of putting the blame on the criminal smugglers (the real problem) and supporting law enforcement efforts to reduce the largest black market in the nation?
 
Maybe even consider discussing the problem with your own Tax Investigation Division, comprised of leaders in the fight against the illicit trafficking of contraband cigarettes who happen to have some excellent enforcement ideas.

An Experienced Leader is a Huge Part Towards a Solution

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives
During the past several months, I attended conferences, made phone calls, and drank gallons of coffee with police from up and down the I-95 corridor who are fighting illicit tobacco trafficking.  We’ve shared ideas and success stories, while exchanging information on how to tackle this growing problem along “The New Tobacco Road.”
 
One of the relationships I’ve recently developed is with The State of New Jersey’s Tax Enforcement Unit in their Office of Criminal Investigations. Their efforts in disrupting illicit traffickers is paying off greatly and brings much needed awareness to this growing crime problem.
 
The TEU is led by Special Agent in Charge Charles Giblin, a seasoned investigator supervising a unit focused on criminal organizations evading state laws and robbing New Jersey citizens of over half a billion dollars of tax revenues needed to fund their schools, roads, and other civic projects.
 
Charlie gets the issues. He and his colleagues have identified $519 million in losses to New Jersey due to tobacco crime, and in classic New Jersey fashion, are attacking the problem head on.  The State has a sophisticated multi-pronged approach to tackling organized crime by seizing criminal assets, thus quadrupling their unit’s arrest statistics in the last five years
 
Charlie shared with me New Jersey’s strategy of approaching these offenders from a broader perspective by coordinating resources from all the law enforcement entities statewide, rather than single jurisdictions arresting “mom and pop” operations. He points to the creation of “fusion centers” where intelligence is shared; wiretaps and buy busts are planned and executed strategically, and effectively.  Jersey is fighting back.
 
Charlie and his team bring a “can do” perspective desperately needed along I-95, The New Tobacco Road, which runs the length of his state right into the heart of New York City.
 
Below is a link to a terrific TEU Enforcement Guide that helps educates law enforcement to the growing problem of tobacco smuggling:
   
 
Fully understanding that law enforcement can’t do it all, we recognize that good police work is only one solution to a much larger problem. I’m excited learn about Charlie’s team and I hope to share TEU strategy and their successes in future posts.
 
Way to go New Jersey!  I love real cops in this game.

Montreal Mafia

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives
Recently, Canadian authorities and officials from the U.S Department of Homeland Security collaborated in taking down one of the largest criminal tobacco smuggling operations in Canadian history. Twenty-eight (28) suspects were arrested, and almost seven (7) million dollars of contraband tobacco were seized.
 
According to law enforcement insiders, this Quebec organization operated in an hierarchical structure similar to the Mafia. What is interesting is that criminal organizations like this one are using the I-95 corridor to ship tobacco leaf from the Carolinas north to illegal factories in Canada to be made into cigarettes. These black market cigarettes are then shipped south and illegally sold in New York and other high profit cities.
 
Without stronger law enforcement presence and tougher legislation, International Organized Crime sees I-95 and it’s communities as “open for business.”

A Win for Rhode Island (H.B. 7762)

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives
In any sporting event, whether it’s the NFL or Pop Warner Football, a score of 66-2 is a resounding win. This is no different in politics, as the state of Rhode Island House of Representatives demonstrated a huge victory in passing HB 7762, increasing the penalty for violating any state law regulating the illicit sale of cigarettes, with 66 yes votes to 2 votes of no.  In like fashion, the Senate consented with a 37-0 vote.
 
Upon reviewing reports and hearing testimony from seasoned law enforcement professionals, the State Legislature was able to recognize that approximately 40% of all cigarettes consumed by smokers in RI are smuggled and/or purchased on the black market.  From start to finish, in less than six (6) months, the Governor signed into law stiffer penalties, making many former misdemeanor offenses felonies and increasing the criminal penalties by as much as ten times what they were a year ago.
 
What law enforcement suggested, “started it all”
 
In 2013, seven (7) individuals were indicted in a complex interstate conspiracy that allegedly defrauded Rhode Island of more than $1 Million in tax revenue. It is alleged that the cigarettes were bought in Virginia and sold in Rhode Island in convenience stores and other locations allegedly owned or operated by participants in the conspiracy and others. The indictment also alleges that those individuals engaged in other types of program fraud, including Social Security and food stamp fraud.
 
 
Great Progress, Great Leadership
 
Rhode Island has set an important standard for other states to follow its winning form:
 
1.          The State Legislature has engaged the tobacco smuggling issue aggressively with tough new laws
 
2.          Excellent RI investigators are using interstate conspiracy expertise to target offenders and professional smugglers.
 
Rhode Island’s legislature and Governor wrote a tough game plan to fight the explosion of tobacco smuggling along I-95, The New Tobacco Road.  They are to be commended for their leadership to act swiftly in the face of this growing crime threat. Hopefully this winning formula will continue to be a high priority in Rhode Island as the fight against tobacco trafficking continues.

All Hail Virginia

Richard Marianos
Assistant Director - Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives

In an era of gridlock and inaction by many states, the Virginia State Crime Commission has forged new ground during the past several months in researching tougher measures to stop criminal tobacco traffickers. 
 
Some of the ideas, which have been investigated and explored, are the feasibility of a singular investigative agency dedicated to criminal tobacco enforcement, and giving more enforcement authority to the Virginia Beverage Control department.
 
This issue is not new to the commission in Richmond; back in 2012 a study was conducted to toughen the criminal penalties for traffickers, but as all crime patterns continue to grow, this problem is not going away.
 
Recently, law enforcement experts met with the commission, whose research demonstrates that tobacco trafficking has become so lucrative that gangs, drug organizations and even terrorists have undertaken tobacco smuggling because of nonexistent penalties and lack of dedicated criminal enforcement.
 
All states along Interstate I-95, “The New Tobacco Road” need to follow suit.
 
The Problem:
Criminals can purchase a pack of cigarettes in Virginia, with the second lowest tobacco tax in America, for approximately $5.50 and sell it illegally in New York City, one of the highest taxed areas, for about $14.00 a pack.
 
The translation:
Mr. Criminal can turn a profit of over $170,000 on one van-load of Virginia cigarettes.

THE NEW CURRENCY OF ORGANIZED CRIME

Richard Marianos
Assistant Director – Retired
Bureau of Alcohol, Tobacco, Firearms and Explosives

Within the past several years, state governments have enacted hefty increases in cigarette taxes with the expectation of increasing tax revenue and discouraging smoking. From criminal investigations nationwide, there is overwhelming evidence that consumers avoid state cigarette taxes by purchasing cigarettes from nearby lower-tax jurisdictions, at Native American reservations or using the Internet. Today, state governments are losing millions of dollars in taxes, and now organized crime and criminal groups of smugglers are lining their pockets with that money. These lost revenues are being targeted by criminals who are driving the illegal transportation and street sale of large numbers of cigarettes from lower tax states, along with the use of counterfeit stamps to bypass warehouse-based tax-stamping facilities.

This is a problem that law enforcement has seen before. My only question is will history repeat itself with the violence of Prohibition?

$1,922,608,709

Revenue lost to black market cigarettes so far this year

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The MacKinac study "Cigarette Taxes and Smuggling" shows the strong correlation between high cigarette taxes and smuggling, theft and other violent crimes.