Small-time to organized crime, smugglers flood the market

By Mickey Gorman

When Bill Stewart used to visit his brother in Lexington, Va. in the late 1990s he made sure to buy 10 cartons of cheap cigarettes before making the return trip to New York.

“It wasn’t like you had to cross an international border like going to Canada,” said Stewart, who is now 55 and lives in southern New Hampshire. “All I had to do was go the speed limit and not get pulled over.”

As soon as he got home to New York Stewart would head to a local bar and open up shop. Within minutes he would sell every last pack. Buying the cigarettes was legal. Reselling them is what made Stewart a casual smuggler, a term adopted by law enforcement officials.

“It paid for the gas for the entire trip, and I was able to take the family out to dinner,” he said. “I could still do it, and I have thought about doing it again.”

But Stewart’s was a small-time operation compared to those who capitalize on the multimillion dollar industry smuggling has grown into today.

More than 900 cartons of contraband cigarettes were seized at a warehouse in the Bronx. Photo courtesy of the New York State Department of Taxation and Finance.

It’s lucrative not only for the smuggler. A smoker who consumes a pack a day of legally purchased cigarettes in New York City spends about $5,100 per year, according to averages provided by the Federal Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). Buying smuggled cigarettes can save the same smoker nearly $3,100.

One in every five cigarettes sold legally in Virginia is smuggled out of the state, according to research from the Tax Foundation, a tax policy think tank in Washington D.C. Virginia’s 30-cent-per-pack state tax ranks second lowest in the country, behind Missouri’s at 17 cents.

The state’s price for legally taxed cigarettes and its access to major northbound highways like Interstate 81 and Interstate 95 make Virginia a hotbed for smugglers looking for an easy avenue to states with higher taxes. Cigarettes legally purchased in Virginia and transported to the northeast can be resold for profit at prices that severely undercut legal prices in Connecticut, New York, Rhode Island and elsewhere.

More than anywhere else in the country, New York is struggling to keep smuggled cigarettes out. Nearly 60 percent of cigarettes purchased in New York are smuggled into the state, the Tax Foundation's research suggests. The state’s $4.35 per-pack tax rate and New York City’s minimum retail price of $10.50 per pack tempt both buyers and sellers to deal in contraband.

Stewart’s shrewd but illegal scheme for providing himself gas and dinner money appear harmless compared to the business cigarette smuggling has mutated into.

That business is becoming more violent, said Kenneth Mosley, a special agent with the ATF, the federal agency charged with regulating alcohol, tobacco and firearms trafficking.

Last May New York authorities charged 16 men with involvement in a smuggling ring. According to New York State Attorney General Eric Schneiderman’s office, some of them had ties to terrorist organizations, although it was unclear if those organizations received any of the profits. The smuggling ring, which bought its cigarettes in Virginia, collected an estimated $55 million in up to seven years.

Law enforcement officials say smugglers will fill up the backs of 18-wheelers with cases of cigarettes. They are usually indistinguishable from legal rigs such as these. Photo by Leigh Dannhauser.

Whether a smuggler is just looking for a little extra cash or is part of a large-scale smuggling operation, the process works about the same.

In Stewart’s case, buying 10 cartons of cigarettes sufficed to pay his personal expenses. A smuggler in a larger operation would repeatedly buy and stockpile 25 cartons of cigarettes, the current legal limit, from different retailers.

As hard as those multiple legal sales are to track, identifying the vehicles carrying the contraband might be even harder. Smugglers carry cigarettes in everything from 18-wheelers and trailers pulled by SUVs to the trunks of sedans.

Once contraband cigarettes make it into states like New York, they are difficult for police to locate despite their prevalence, said Lt. Eric Laughton of New York State Police’s special investigations unit.

Laughton’s division, which recently busted a New York man for storing nearly 1 million smuggled cigarettes, works closely with other state police divisions and other investigative government bodies.

“Communication is the best I’ve seen it in my 25 years as a state trooper,” Laughton said.

But the increased cooperation between divisions is only a piece of the puzzle to stopping cigarette smuggling.

“Awareness becomes the key for our New York State troopers,” Laughton said. “They’re sold everywhere. They’re sold in bodegas. They’re sold in the backs of cars.”