HOLMBERG: Eric Garner case also about bootleg cigarettes

Posted at 12:49 AM, Dec 05, 2014
and last updated 2014-12-05 00:49:36-05

RICHMOND, Va. -- Aside from the question about excessive use of force by the New York City police in the Eric Garner choking case, we can also look at him as a participating casualty in the escalating war on bootleg cigarettes.

An estimated 40 percent of black market cigarettes going to high-tax northern states like New York come from right here in the Old Dominion, as ATF agent told me today, which makes it our problem, too.

New York police say Garner was suspected of selling loose, bootleg cigarettes when the disaster began. In March, Garner was busted for selling unstamped cigarettes right next door to where the fatal confrontation occurred. Two months later he was busted again nearby, reportedly with six packs of untaxed cigarettes.

Clearly, Garner had grown tired of being arrested.

"Who'd I sell cigarettes to? To whom?" he asked one of the officers in the viral video of the fatal confrontation. "Every time you see me, you want to arrest me," Garner said angrily. "I'm tired of it. It stops today."

Black market cigarettes have become a huge problem in New York and New York City, which has the highest taxes on tobacco - almost $6 a pack. That's why you pay about $13 for a single pack of cigarettes there, as opposed to about $4.50 a pack in Virginia, which has the second lowest state tax on cigarettes (30 cents per pack).

Authorities in New York City believe as many as half the cigarettes sold there are smuggled in, costing the city an estimated half-billion dollars in tax revenue each year. A New York Times story three years ago detailed the thriving loose cigarette business, talking to an unrepentant street dealer who said police call him a "fish" because he's so easy to catch. That "loosie" peddler said he made $120 to $150 a day, paying smugglers a little over $50 dollars a carton.

But those are the street-level dealers. The ones  who move the cigarettes north from here and other low-tax states - by the dozens or hundreds of cartons - can make big money.

"It makes it very worthwhile" for smugglers, said Richmond ATF special agent Ken Mosley. "It's such a monumental problem."

You could see this coming a long time ago. Seventeen years ago, when some states like New York started applying big sin taxes on tobacco, I wrote a column predicting a huge cigarette black market and a resulting heavy response from state and federal governments trying to protect their tax revenues.  I was far from the only one.
Last month, the Virginia State Crime Commission reported on the extent of the problem, saying that some of that black market cigarette money is going to terrorists overseas.

Which prompted Virginia Delegate Manoli Loupassi (R-68th District) to say, "You want to fix the issue, you either have New York lower their tax or have us raise our tax."

It's just so easy to smuggle - buy a few cartons from each store your visit - buying too much from one place can raise suspicions - and head north.

"You have potentially a $7 to $8 profit window" per pack, Mosley said, although 'no trafficker is going to make that because there are a lot of steps along the way . . . " Such as whether or not the smugglers forge a New York tax stamp or if they're sold on the streets in stick or "loose" form, which can bring 75 cents each or two for $1 - even as much as $1 a smoke.

Many of the smugglers move here from places like New York so they can make purchases regularly, said Mosley. Some are in the convenience store or related sales businesses.

Building a federal trafficking case against the pros is no walk in the park, Mosley said.

"It's a big, collaborative effort because it's such a monumental problem," Mosley said. "You can't imagine some of the hours that law enforcement people that I know and work with put into these investigations. We have some really dedicated officers and detectives and agents from all of these agencies in Virginia (and beyond) trying to address it."

But as long as there's such a huge profit margin, there will be plenty of people moving cartons from here to New York and beyond. And plenty of people willing to sell loose cigarettes on the street at a dollar at a time, getting arrested again and again.