"All cigarette trafficking schemes, no matter the methods employed, depend upon tax avoidance; it is the failure to pay some or all of legally required taxes that generates the profit for the criminal trafficker." – Virginia State Crime Commission
The circumvention of a state's cigarette excise tax may not seem like a criminal enterprise worthy of serious attention from law enforcement. But Corporal Detective Johnny Capocelli of Virginia's Chesterfield County Police Department strongly disagrees. "This isn't a tax issue. This is about the criminal activities associated with cigarette trafficking," Capocelli says. "And it's so new that many law enforcement agencies aren't getting into it yet."
Unfortunately, that is exactly what these criminals are counting on: Law enforcement not caring or not being well-informed enough to stop them.
The criminal exploitation of cigarettes was a logical step for traffickers. Cigarettes are easy to acquire and transport. In addition, they are an addictive product with a supply that needs to be replaced regularly due to rapid consumption.
Ray Rowley, a 30-year federal law enforcement veteran, now works with Altria Client Services in Richmond, Va. Rowley helps cigarette giant Phillip Morris with one of their major initiatives: Educating law enforcement about how cigarette trafficking works, the impact it can have in a community and the criminal activities it supports.
The reasons law enforcement agencies should care about cigarette trafficking are simple, says Rowley:
- Trafficking results in direct tax losses
- It finances other criminal activity and enterprises
- Established trafficking routes allow for the movement of other illicit goods
- It harms legitimate businesses and trade channels
- Traffickers are often armed and may use violence
- If the activity is allowed to thrive in a community, it will attract more criminals
- Promotes other crimes like money laundering, robbery, weapons and narcotics trafficking, violence between trafficking rivals and more
Chesterfield County alone has documented 99 cigarette trafficking-linked crimes since 2010, but many more were probably not reported to authorities.
At the 2013 Virginia Association of Chiefs of Police Conference in Williamsburg, Va., Rowley demonstrated the seriousness of cigarette-trafficking operations by discussing Operation Tobacco Road, a cigarette smuggling bust that spanned four states and generated $55 million in illegal sales.
The high-profile operation was successful, leading to 16 arrests. While this was a big win for the state and federal law enforcement agencies involved, Operation Tobacco Road also uncovered a far more sinister consequence of trafficking. After investigating the associates of those arrested, there was circumstantial evidence that some of the laundered money was used to fund the efforts of terrorist groups overseas.
Rowley did point out, however, that not all smuggling rings are linked to terrorism, "but some are. And not all of these rings are being investigated the way they should be."
States with low cigarette excise taxes are targeted for trafficking. And according to the Chesterfield Police Department, Virginia has become a primary cigarette source for traffickers in the U.S. for this reason – the state has one of the lowest tax rates in the country at $0.30 per pack. It is second only to Missouri, whose tax rate is $0.17 per pack.
That is how those involved with cigarette trafficking make their money, as the Virginia State Crime Commission said in their 2013 report on illegal cigarette trafficking: "While the differences between Virginia and the other states in terms of tax rates may not seem particularly large at the per pack level, they quickly equate to large quantities of money when the actual tax costs of either cartons or cases are compared."
Cigarette traffickers exploit the cost differential between low-tax states and states with higher tax rates. For example, the tax on a carton of cigarettes is $3.00 in Virginia, whereas the tax per carton skyrockets to $58.50 in New York City.
Virginia law enforcement agencies, with assistance from federal authorities in some cases, have led the charge in dismantling smuggling operations and creating legislation that criminalizes acts that, at one time, broke no law. In 2012, Virginia passed anti-smuggling legislation that addressed cigarette trafficking. One year later, the law was changed, updating crimes under this category from misdemeanors to felonies.
Prior to states like Virginia taking actions, many state agencies knew the trafficking activities were wrong, but there were no laws to hold people accountable. And until someone involved crossed a state line, there was no federal authority to intervene.
Effectively targeting these smuggling networks is still a work in progress. Rowley says the best offensive strategy against cigarette trafficking requires law enforcement at local, state and federal levels. Officers need to make a commitment to not only become educated and engaged, but also be willing to collaborate with other agencies.
Capocelli says he will continue to lead his department's efforts in bringing these criminals to justice and hopes others will follow suit. He says it's more than the economic repercussions that drive him. Yes, cigarette trafficking carries higher profits than cocaine, heroin, marijuana and guns. But fundamentally, it undermines what is at the heart of every community – its citizens, and the law enforcement officers that swear an oath to serve and protect them.
