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Cigarette Smuggling: It Adds Up

The “Tobacco Trail” tempts two-bit crooks and big-time smuggling rings.


While schools and states hem and haw about how to best regulate e-cigarettes, it seems that the lo-fi versions are still causing just as much of a headache. On Monday, the Virginia State Crime Commission said it would launch a new investigation into illegal cigarette trafficking there.

Cigarette smugglers (buttleggers?) know what they’re doing, and they know where to go to do it. The taxes on cigarettes are so low in Virginia, and so high in New York, for instance, that cigarette smugglers can make a killing in a short, one-day’s drive. (Don’t forget your hollowed-out concrete slabs, guys.) The New York Times reported earlier this year that New York has the highest rate of cigarette smuggling in the country, and “perhaps not coincidentally” has the highest taxes, too. According to estimates by the Mackinac Center for Public Policy, three out of every five cigarettes smoked in the state of New York had been illegally smuggled in. Says the Associated Press:

Bootleggers can buy a pack of premium cigarettes for about $5.55 in Virginia, which has the nation’s second-lowest tobacco tax, and sell it for a big profit on the black market in New York City, where a higher tax pushes the cost to about $14 a pack. A smuggler can turn a profit of about $170,000 on one vanload of cigarettes.

The Richmond Times-Dispatch put it another way: Virginia’s excise tax for a carton of cigarettes is $3; in New York City, it’s $58.50. Virginia’s crime commission has been hearing from experts that this modern-day rum-running is so lucrative, in fact, that organized crime groups and major drug dealers are switching their product, from narcotics to cigarettes. Besides the fact that the turnaround and profit are fast, the penalties they would face if they got caught are lighter than they would be for hard drugs.

The "Tobacco Trail" continues to tempt crooks large and small, frustrating law enforcement, hurting honest small-business owners, and costing states a fortune in lost tax revenue.

Before this gives you any bright ideas, though, consider the consequences faced by one cigarette smuggling ring that did get caught. In May, the NYPD and New York’s attorney general announced the indictment of 16 members of a group that they say had “flooded” the city and state with more than a million cartons of Virginia cigarettes. They were charged with enterprise corruption, money laundering, and tax crimes, facing up to 25 years in prison each. Law enforcement had seized 65,000 forged New York tax stamps and 20,000 cartons from their storage facilities (that’s the number of cartons they allegedly moved each week). Police estimated that the smuggling ring’s operations were worth something like $55 million in revenue.

Just in case you weren’t paying attention, the press release from Attorney General Schneiderman’s office added: “While it hasn’t been established yet where the illicit proceeds ended up, similar schemes have been used in the past to help fund organizations like Hamas and Hezbollah.” At the press conference announcing the indictment, Police Commissioner Ray Kelly suggested that the smugglers would not have necessarily been caught had some of them not already been on New York law enforcement’s radar for having “links to known terrorists.”

“Not only did this organized crime ring hurt law abiding mom-and-pop shops and other businesses in New York by putting those who do pay taxes at a competitive disadvantage,” said Schneiderman at the press conference, “there is a very real concern about the possibility of violence related to this type of enterprise.”

He was right. The smuggling ring’s tale would soon take an even more sordid turn—towards murder. In August and September, say Schneiderman and Kelly, two of the ring’s members, Basel Ramadan and Yousseff Odeh, tried to order a hit on witnesses they thought were cooperating with law enforcement against them. Ramadan and Odeh allegedly called a hit man on a phone from Riker’s Island, where they have been held without bail since their initial arraignment. The New YorkDaily News quotes court documents: “Ramadan reportedly said he had ‘one of those problems.’ The undercover assured him that he could ‘take care of it.’”

Yes, lucky for everyone—except for the defendants—that “hit man” on the other end of the line was actually an undercover NYPD detective. The duped prisoners were then indicted, again, and now face 25 years to life in prison for the scheme. (See previous: "Hiring a Hit Man Seems Like a Bad Idea.")

So no one actually got murdered. But the “Tobacco Trail” continues to tempt crooks large and small, frustrating law enforcement, hurting honest small-business owners, and costing states a fortune in lost tax revenue. Oh, and cigarettes will still kill you, wherever you may buy them—that part won’t ever change.