Responding to an increase in illegal cigarette trafficking throughout the state of Maryland, Comptroller Peter Franchot held a news conference on July 25 to discuss his plan to toughen penalties. He also released the latest statistics on the illegal cigarette trade, and contraband alcohol and fuel.
“…We’ve had an epidemic increase in cigarette smuggling and that’s a huge problem for us,” said Franchot. “I believe this trend is going to continue unless we dramatically increase the penalties for cigarette smuggling and frankly, the alcohol, too.”
With state authorities eyeing potential tax revenues as eagerly as smugglers are looking to score whopping illegal profits, Franchot is asking the Maryland General Assembly to increase the amount of the fine for illegally selling cigarettes. He also wants crack down on illegal alcohol sales.
“It’s too lucrative and the penalties are too small when you see criminals travel back to the area where they were busted …for their court date and treat it as the perfect opportunity to pick up and transport another load of contraband tobacco products,” he said. He cited as examples Bronx, N.Y. residents Stephon Leroy Wilkins, 49, and Chaniqua R. Rhodes, 40. The pair was arrested three times in three months on similar charges, he said. In the second arrest, on April 2, they are charged with picking up a shipment of contraband cigarettes in Virginia just before a court appearance.
Franchot’s remarks come two weeks after four men were released on bail from the Washington County Detention Center in connection with transporting contraband cigarettes. Maryland State Police stopped two cars carrying the men and discovered a total of 26,000 packs of illegal cigarettes.
Statements released from the Maryland comptroller’s office say Osama T. Issa and Hazim M. Abuhakmeh, both from Brooklyn, N.Y., Mohammad T. Issa, from College Point, N.Y., and Abdelaziz M. Abdelaziz, of Philadelphia, Pa., were all taken into custody along with almost $154,000 worth of illegal cigarettes allegedly found in two vehicles.
Authorities could not say how large the operation was or where exactly the men were headed when they were arrested just south of Interstate 70 on Interstate 81.
The men have all been charged with transportation and possession of contraband cigarettes in Maryland, and Abuhakmeh and Abdelaziz are also facing added charges of conspiracy to transport and possess contraband cigarettes in Maryland.
Mohammad T. Issa was given the highest bond at $15,000, followed by Osama T. Issa with a bond of $10,000. Both Abuhakmeh and Abdelaziz were given $5,000 bonds. None of the alleged smugglers has an attorney, officials said.
According to the National Center for Policy Analysis, contraband cigarettes siphon nearly $5 billion from the federal government each year.
“It’s a total tax loss to the State of Maryland of more than $652,000,” said Franchot, adding that 196 tobacco violations have been prosecuted in the 2012 fiscal year, up from the 115 in FY 2011.
In Maryland, the total value of illegal cigarettes seized so far this year is closing in on $2 million, up from the $1. 2 million confiscated in 2011, officials said. Contraband alcohol confiscated in FY 2011 had a retail value of $50,000. That number jumped to $92,000 in the latest report.
“They see this as a way to make a quick profit,” said Earl Fowlkes, assistant director for the Comptroller’s Field Enforcement Division, speaking of the “mom and pop” stores buying the contraband. “Those are sales off the books so we never realize any of the taxes that are actually due.” Fowlkes said stores often charge the regular price for the contraband and pocket the difference.
Currently, Maryland law doles out a $50 fine for each carton of illegal cigarettes transported and up to two years in prison when the crime is charged as a felony. Possession of illegal tobacco, when charged as a misdemeanor, carries a maximum one-year prison sentence and $1,000 fine.
Franchot wants to see that fine increase to $150 per carton for the first offense and $300 for repeat offenders.
According to the federal Bureau of Alcohol, Tobacco and Firearms (ATF), there is a direct correlation between the size of a state’s cigarette tax and the amount of illegal tobacco trafficking that occurs.
Smugglers travel to Southern states like Virginia, where tobacco products are only taxed 30 cents a pack, to buy large quantities of cigarettes. The cartons and semi-trucks of contraband cigarettes are then transported, given fraudulent tax stamps and sold at a discount in northern locales such as New York City where the state, city and pre-paid sales taxes on cigarettes total 6.46.
ATF fact sheets state that a pack of cigarettes in Virginia bought for around $4.50 can be sold in New York for $13, leaving an $8.50 profit. With 60 cartons in one case, the profit would be $5,100. At the same price, 800 cases of cigarettes can bring up to $4,080,000 in illegal profit.
ATF publications on tobacco diversion also show that counterfeit cigarettes are a major part of the illegal tobacco trade.
Fake cigarettes have proven to be even deadlier than the cancerous ones sold in stores, as each puff puts an increased amount of tar, nicotine and carbon monoxide into the body. Some fake cigarettes contain plastic, sand, and a host of other harmful materials not found in real cigarettes, research shows.