Cigarette Smuggling Linked to Terrorism
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 as 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 director 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 is low, such as Virginia and North Carolina, transport them up Interstate 95 to states such as Maryland, New York, Pennsylvania and New Jersey and then sell 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 link 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 under 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 can 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 $40 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.
© 2004 The Washington Post Company