[Intl-tobacco] U.S. Cigarette Smuggling Linked to Terrorism

[robert.weissman@essentialinformation.org]

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http://www.washingtonpost.com/ac2/wp-dyn/A23384-2004Jun7?language=3Dprinter

By Sari Horwitz
Washington Post Staff Writer
Tuesday, June 8, 2004; Page A01

Smugglers with ties to terrorist groups are acquiring millions of dollars
from illegal cigarette sales and funneling the cash to organizations such a=
s
al Qaeda and Hezbollah, federal law enforcement officials say, prompting a
nationwide crackdown on black market tobacco.

The federal Bureau of Alcohol, Tobacco, Firearms and Explosives has more
than 300 open cases of illicit cigarette trafficking -- including several
with terrorist links -- up from only a handful five years ago, ATF sources
said.

"This is a major priority for us," said Michael Bouchard, assistant directo=
r
of the ATF. "The deeper we dig into these cases, the more ties to terrorism
we're discovering."

The lucrative trafficking of cigarettes, known as cigarette diversion, is a
simple scheme but difficult to stop, law enforcement officials say. The
traffickers purchase a large volume of cigarettes in states where the tax i=
s
low, such as Virginia and North Carolina, transport them up Interstate 95 t=
o
states such as Maryland, New York, Pennsylvania and New Jersey and then sel=
l
them at a discount without paying the higher cigarette taxes in those
states.

With huge profits -- and low penalties for arrest and conviction -- illicit
cigarette trafficking now has begun to rival drug trafficking as a funding
choice for terrorist groups, said William Billingslea, an ATF senior
intelligence analyst who has studied the issue extensively.

Although black market cigarette sales have been around for decades, the lin=
k
to suspected terrorist groups is a new and growing phenomenon.

"The schemes provide terrorists millions of dollars which can be used to
purchase firearms and explosives to use against the United States and
others," said ATF Director Carl J. Truscott, who was appointed to head the
agency two months ago after 22 years in the Secret Service.

Several major cases of illicit cigarette trafficking with terrorist links
have involved the purchase of cigarettes in Virginia and are currently unde=
r
investigation, federal law enforcement sources said, adding that there are
other cases nationally with links between the traffickers and Hamas,
Hezbollah and al Qaeda.

"The money is so lucrative," Billingslea said.

In New York City, for example, where the combined state and city tax on
cigarettes is $3 a pack, a carton can sell for about $75. The trafficker ca=
n
buy a carton for about $20 in Virginia, where the tax is 2.5 cents a pack,
and then sell it to a mom-and-pop store in New York at a profit of about $4=
0
a carton, ATF officials said.

A smuggler can make about $2 million on a single truckload of cigarettes. A
truckload contains 800 cases, or 48,000 cartons.

"People go shopping for a bargain," Billingslea said. "Why pay $75 for a
carton of cigarettes when I know someone down the street who will sell me a
carton for $15 less out of the back of a car?"

The first large-scale cigarette trafficking case tied to terrorism was
prosecuted in North Carolina in 2002. A federal jury in Charlotte convicted
Mohamad Hammoud, 28, of violating a ban on providing material support to
terrorist groups by funneling profits from a multimillion-dollar
cigarette-smuggling operation to Hezbollah.

The jury also found Hammoud, whom prosecutors described as the leader of a
terrorist cell, and his brother guilty of cigarette smuggling, racketeering
and money laundering. The two men, natives of Lebanon, were accused of
smuggling at least $7.9 million worth of cigarettes out of North Carolina
and selling them in Michigan. Hammoud was sentenced to 155 years in prison.
Prosecutors were able to prove that profits from the venture were funneled
to high-ranking Hezbollah leaders. And Hammoud was caught on wiretaps
speaking on the telephone with Hezbollah's military commander in Lebanon,
Sheik Abbas Harake, according to trial testimony.

In another case in September, Hassan Moussa Makki, 41, a key player in a
multimillion-dollar interstate cigarette smuggling ring, pleaded guilty in
Michigan to providing material support for terrorism and participating in a
racketeering conspiracy. Prosecutors said he also funneled money to
Hezbollah.

Makki, a native of Lebanon, was one of 12 people indicted last year in the
scheme to buy low-tax cigarettes in North Carolina and sell them in
Michigan. He was sentenced to 57 months in prison.

Law enforcement sources said the terrorist links are established in these
and other ongoing investigations through wiretaps and background
intelligence investigations and by running the traffickers' names and those
of their associates through CIA, FBI and Homeland Security databases. When =
a
terrorist tie is suspected, the cigarette-trafficking probe becomes a joint
investigation with one of 66 Joint Terrorism Task Forces across the country=
.
The task forces, run by the FBI, are composed of federal, state and local
law enforcement officials.

Paul J. McNulty, the U.S. attorney in Alexandria, last year charged 10
people with possession and distribution of contraband cigarettes, wire frau=
d
and money laundering as part of a scheme to smuggle more than $2 million in
cigarettes bought in Virginia to New York. A man whose name came up in that
investigation was arrested in Detroit carrying hundreds of thousands of
dollars in wire transfer receipts showing payments to people associated wit=
h
Hezbollah.

In an interview, McNulty declined to comment on terrorist links in that
case. But he said the ATF and other law enforcement agencies are taking
cigarette smuggling "more seriously than ever."

"We are pursuing cases such as cigarette smuggling because of the
possibility that proceeds from that crime could end up in the hands of
terrorists," McNulty said.

He added that the Charlotte case made law enforcement officials more
attentive to cigarette smuggling as a key source of financial support for
terrorists.

"There are other sources, but this is the one that has gotten the attention
of law enforcement," McNulty said.

Cigarette trafficking is difficult to stop, partly because tobacco is a
legal commodity. Smuggling cigarettes becomes a federal crime only when mor=
e
than 60,000 cigarettes, or 300 cartons, are purchased to avoid payment of
state tax, said Jerry Bowerman, chief of the ATF alcohol and tobacco
enforcement branch.

McNulty said catching the suspects is extremely labor-intensive.
In his case, he said, New York tax authorities placed advertisements in
various newspapers and magazines in the New York City area offering Virgini=
a
cigarettes for sale. The ads for A&A Tobacco Wholesale listed a Virginia
telephone number to place orders. A Virginia post office box was set up as =
a
billing address. Incoming calls were switched to and recorded by an agent
with the New York office of tax enforcement.

An undercover storefront location was established for A&A Tobacco Wholesale
by law enforcement personnel in King George County in Virginia, where
investigators from the New York tax office posed as employees and filled th=
e
cigarette orders.

When prospective cigarette purchasers telephoned the advertised number and
placed orders, they were told that the cigarettes being sold would bear
counterfeit joint New York State and New York City tax stamps.


=A9 2004 The Washington Post Company

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