Transcript Investigator Randy Cherubino

Contraband Tobacco Smuggling
New York State
Office of Tax Enforcement
Petroleum, Alcohol, Tobacco Bureau
Chief Investigator John Connolly
[email protected]
(O)518-485-7411/(C)518-461-4783
REGULATORY STRUCTURE INVOLVING CIGARS/TP
MANUFACTURER
WHOLESALER
RETAILER
CONSUMER
TOBACCO PRODUCTS SMUGGLING
-The TP tax varies by state, some are high and some are low.
-At present PA is only state that has no TP tax, hopefully that
will change soon.
-TP manufacturers usually only sell to larger accounts (wholesalers).
-These wholesalers then sell to other wholesalers or retail customers.
-Some TP wholesalers set up in low tax states or states with favorable
regulations or little enforcement activity
-Many TP wholesalers have set up businesses in PA because there is
currently no TP tax, no registration (other than with PA Dept of State)
and no reporting (tax return) requirements
-Several TP wholesalers have their main business in another state
(ie, CT,MA,MI) but have set up a wholesale operation in PA to make it
harder to track where the product is going to.
WHAT TO LOOK FOR
-There are no stamps on cigars, chew or loose tobacco
packaging.
-Lack of proper invoicing is enough for us to seize product
and write charges
-Proper invoicing means invoices from a NYS registered
distributor/wholesaler who has authority to charge and
collect TP tax.
-Large amount of TP but only minimal proper invoices or
older dated invoices.
-Look for odd ball type invoices as you’re in a store. Ones
with no business name on them/hand written.
-No name cargo vans making deliveries
-Deliveries by USPS, UPS or FEDEX
-Surveillance of suspected locations
THE CIGARETTE PROBLEM
-Along with the increase in excise taxes in most states, the
incentive to evade taxes has risen dramatically.
-The states loose millions of tax dollars each year
-Cigarette smuggling is profitable
-Export cigarette diversion
-State excise tax stamp counterfeiting
-Internet sales/reservations sales/cross border sales
UNTAXED CIGARETTES
- Any pack of cigarettes without a legitimate
New York State excise tax stamp
- Cigarettes without any tax stamp
- Cigarettes with a tax stamps from a state other
than New York
- In NYC cigarettes without a joint New York
State/NYC stamp
- Cigarettes with a counterfeit tax stamp
You have loosely organized groups of Arabs,
Hispanics, Chinese and Russians moving a great
deal of the untaxed cigarettes
REGULATORY STRUCTURE INVOLVING MOVEMENT OF CIGARETTES
MANUFACTURERS
AGENTS
WHOLESALERS
RETAILERS
CONSUMERS
ILLEGAL SMUGGLING STRUCTURE INVOLVING CIGARETTES
SOURCE OF CIGARETTES
DISTRIBUTOR
WHOLESALER
RETAILER
CONSUMER
CIGARETTE CRIMES IN NYS
• Possession of untaxed cigarettes is a Misdemeanor
• Possession of over 50 cartons of untaxed cigarettes
is an E Felony
• Possession of over 150 cartons of untaxed cigarettes
is a D Felony
• More than 10 cartons in vehicle and its seizable
Native American Reservations located in New York State
28 ARRESTED IN CIGARETTE SMUGGLING SCAM
September 2, 2005
A year-and-a-half-long investigation linking tobacco sweatshops in China to New York City bootleggers and Indian
reservations on Long Island to Jordanian smugglers ended yesterday with 28 arrests, law-enforcement officials said.
The ring, run by Middle Eastern nationals, was taken down by investigators led by the NYPD and included members of the
Bureau of Alcohol, Tobacco and Firearms, the Bronx district attorney's office, state police and the Division of Taxation and
Finance.
The ring purchased cigarettes from Indian reservations and then resold them to bodegas, stores and independent distributors
primarily in the Bronx, but also in Manhattan and Yonkers, officials said.
The 28-member ring made an estimated $10 million in profits, and deprived state and city coffers of from $18 million to $24
million in tax revenue. The ring was led by Faiz Haddad, Emad Al-Naimat and Ahamad Alnuaimat, all of the Bronx, officials
said. They and their accomplices face several charges including money laundering, according to the indictment.
Law-enforcement officials yesterday stood next to stacks of boxes containing thousands of cigarettes, some of them
counterfeit cartons made in China, and a table filled with bundles of cash, fake tax stamps and two guns recovered from the
defendants' homes or the ring's storage facilities. The officials also said that a total of as much as $1 million was smuggled
onto Royal Jordanian Airlines flights out of Kennedy Airport on six separate occasions by Jordanian air marshals and flight
attendants.
A law-enforcement source said they never witnessed the actual cash change hands between the bootleggers and the couriers.
But while on surveillance jobs, investigators saw bags and suitcases containing the money being exchanged.
They said on numerous occasions they heard references on wiretaps by the ring's members to the money being sent to Jordan.
Where the money went once it arrived in Jordan remains a central unsolved question and a focus of the continuing
investigation. Police Commissioner Ray Kelly said various agencies, including the Joint Terrorist Task Force, are looking
into where the money trail ends.