Laws, limited resources hamper local police and prosecutors

By Cory Smith

Rockbridge County Sheriff’s Deputy Troy Wimer remembers getting a tip about a year ago that two men were buying cartons and cartons of cigarettes at a gas station in tiny Raphine, Va., just off Interstate 81.

“They actually had debit cards and gift cards they had stolen and used,” Wimer said. “They had rented a minivan, and I just so happened to be close to the interstate, and they came by me on the interstate in that minivan. When I stopped them, they had 50 cartons of cigarettes and a hundred of those fake cards and stolen cards.”

Wimer arrested Allan Harvey and Mamadou Bah. Both pleaded guilty to state cigarette smuggling charges, served brief sentences, and were soon caught again by Tennessee state troopers for speeding in their rented car. This time, their case was handed over to the federal court system because federal agents accused them of smuggling cigarettes across state lines.

Wimer later learned that federal authorities thought the group was part of an organized smuggling ring operating from Georgia to New York. Their minivan was one of many – joined sometimes by tractor trailers or cars with trunks packed with cigarettes – that police and federal agents say ply the interstates between southern and northeastern states. They take advantage of the big differences in state cigarette taxes by buying cigarettes in low-tax states such as Virginia and selling them in the higher-taxed northeast.

Virginia has the fourth highest cigarette smuggling rate in the nation, with about 21 percent of cigarettes smuggled out of state, according to the Tax Foundation, a nonpartisan research think tank based in Washington, D.C.

With the cigarette tax rate in Virginia at 30 cents per pack, it is easy for smugglers to make huge profits in a state such as New York, where the cigarette tax rate is $4.35. The price difference for a premium pack of cigarettes between Virginia and New York is about $6.95.

The clerk at the gas station in Raphine had tipped Wimer, and even managed a description of the minivan. But not all cases are that easy.

“If you are not right there, you are probably not going to catch them,” Wimer said. “It’s all about the description, what you get from the store clerk.”

Law enforcement officials almost everywhere acknowledge that unless store clerks alert them, they are probably not going to catch smugglers.

Virginia does not have a special task force or coalition of agencies to target cigarette smugglers, said Sgt. Robert Carpentieri, a public information officer with the State Police. But bureaus within the State Police do cooperate to allow troopers to better handle cigarette smuggling cases, he said.

“Troopers will conduct routine searches of vehicles and follow up on it to get other members of the department involved,” Carpentieri said.

Smuggling cases are a challenge for the court system as well. In the budget years between 2008 and 2012, 374 defendants were charged in Virginia general district courts with violating local cigarette tax ordinances. But only 100 convictions resulted.

Circuit courts have had similar problems convicting cigarette violations. Between 2008 and 2012, 78 charges of violating state smuggling laws were filed along with three charges for violating local cigarette tax ordinances. Of the 81 total charges, only 34 convictions resulted.

Chief Deputy Commonwealth's Attorney Christopher Billias successfully prosecuted three people for smuggling in Rockbridge County in 2011. But he says getting convictions is tough.

“When you prosecute these cases, if you don’t get a confession, you’ve got to prove the case against the person typically on circumstantial evidence,” said Christopher Billias, Chief Deputy Commonwealth’s Attorney for Rockbridge County and the City of Lexington. “You’re going to need video, you’re going to need people from the store to cooperate, and you’re going to need to back track where the cigarettes came from. And if they’re not telling you anything, it’s pretty hard to [win the case].”

Billias prosecuted a case against two men, Michael Theodore Lewis and John William Harper, and a woman, Shontia Leftwich, arrested in Lexington in December 2010. The three also used stolen gift cards to purchase cigarettes, and in some cases stole cartons of cigarettes from stores outright. Leftwich would distract the store clerk, Billias said, while Lewis and Harper stole the cigarettes.

“They came into the CVS here in Lexington ... and distracted the clerk and just took cartons and cartons of cigarettes and took off with them,” Billias said. “When we caught up with them, they had cases of cigarettes in the back of their car.”

The trio were tried and convicted in August 2011 on state cigarette smuggling charges. Lewis and Harper were given four-year prison terms. Leftwich got 20 months.

Violating state cigarette smuggling laws generally carries a class 6 felony sentence, meaning one to five years imprisonment or a year in jail and a fine of up to $2,500. Local cigarette tax ordinance violations can result in a one-year maximum jail sentence and $2,500 fine.

Billias was pleased with the outcome of the Lexington case.

“We got pretty good sentences considering what the [sentencing] guidelines were and considering what typically happens in these cases,” Billias said.

State Crime Commission Director of Legal Affairs Stewart Petoe says the number of local cigarette tax prosecutions went down in both 2012 and 2013.

“Perhaps there’s not been much emphasis in several localities with enforcing local ordinances,” Petoe said. In fact, he attributed the high numbers in earlier years to two or three localities that had cracked down on smuggling.

Virginia in 2012 escalated the penalties for cigarette smugglers if they are convicted of cigarette transportation or tax violations. The new penalties should increase the chances that a person thinks twice before smuggling cigarettes out of Virginia, Billias said.

“I’m certain from doing this work for this number of years now that strict penalties definitely have an effect on conduct," Billias said. "To measure that is extremely difficult, but the lack of penalty or a minor penalty really encourages the conduct. I think any kind of change where you have stricter enforcement on these areas certainly has to help.”

Policing smuggling also involves knowing the many ways smugglers operate. Tax avoidance by wholesalers and manufacturers, selling “off the books,” forging tax stamps, and “smurfing” – when a group gathers cigarettes from multiple places and then transports them in bulk – are the most common, according to a 2012 report released by the Virginia State Crime Commission.

Wholesalers avoid taxes by falsely reporting, or underreporting, cigarette sales to the state and federal government. That allows wholesalers to hide the smuggled cigarettes sales.

Retailers can also sell “off the books” by not including the proper cigarette tax stamp, forging a stamp or tearing part of the correct stamp. Manufacturers are required to put a state-designated tax stamp on every cigarette pack produced. Changing the stamp or removing it from the carton is a crime.

In a smurfing operation, people buy up cigarettes for a “mastermind of a local group” who will gather cigarettes from all over the state, said Petoe.

Stewart Petoe explains smurfing.

Petoe says smurfing and fraudulent retail storefront operations appear to be the most common smuggling techniques in Virginia.

He knows of a couple dozen stores that operate directly with smuggling rings, he said, though he would not name them.

“It may not happen in terms of large numbers," he said. "However, all it takes is a couple dozen engaging in fraudulent retail operations and all of a sudden you have trafficked thousands and thousands of cartons of cigarettes through your operation.”

Smugglers most often use minivans to get their cargo north, said Lt. Kevin Hood of the State Police Bureau of Criminal Investigation.

“We stop more cars than tractor trailers,” said Hood, who has worked for state police for 25 years. “We deal more with minivans transporting cigarettes because for us we stop more of them and have more contact with cars and vans than we do tractor trailers.”

It’s hard to track the minivans, said Wimer, the Rockbridge Sheriff’s deputy.

“They jump off the interstate and they hit the gas station that’s real close to the interstate, get as many cartons as they can get, get back on the interstate and then go to the next exit where there’s a gas station close by,” Wimer said. “They’ll just go all up and down [Interstate] 81 doing the same thing, all up and down [Interstate] 64, [too].”

Hood said police will check big trucks that are required to stop at the state’s motor carrier service centers, commonly known as weigh stations. But those checks are done only after a special request is made by the officer on site, said Sgt. Terry Knowlton with the State Police, and they are not a common practice.

The Virginia Department of Motor Vehicles (DMV) is responsible for monitoring and operating weigh stations in Virginia. Weigh stations monitor trucks to make sure they comply with state and federal laws regarding size and weight of the trucks moving throughout Virginia, according to the DMV’s website.

The process of tracking down a cigarette smuggling operation can be complex, Hood said, but he still thinks it’s worth the effort because of the amount of money involved.

“The issue is complex and there are a lot of pieces to the crime,” he said. “Even if it is criminal, if there is a way to make money, people will do it.”