A Charlottesville,Va., man seized in the District with one million untaxed cigarettes, has become the first person tried and convicted under a law aimed at curbing an interstate racket that authorities say costs taxpayers more than $500 million a year in lost revenue.

Leroy W. Berry, 44, was convicted in U.S. District Court Wednesday and faces a maximum fine of $100,000 and five years in prison. He was released on personal bond by Judge John Ratt pending sentencing in September.

Prosecutors here said Berry was arrested last April as he and a helper were stacking cartons inside a Hertz rental truck at 9th and G Streets NW. They said Barry had passed himself off as a legitimate Virginia businessman and purchased 5,430 cartons from a D.C. wholesaler for $18,500 in cash. The high-volume sale allowed him to sidestep an additional 13 cents per pack in D.C. tax. That would have cost $7,020.

D.C. police, along with federal Alcohol, Firearms and Tobacco agents arrested Barry after he failed to produce a wholesale or retailer license. The confiscated cigarettes were later sold at auction here for $5,700.

Prosecutors said Barry apparently "blundered into an ongoing investigation" of local cigarette trafficking when he first approached his wholesaler, who police say was unaware of any wrongdoing.

The new statute, under which Barry was convicted, makes cigarette smuggling a federal crime and reinforces a hodgepodge of state laws that had proved largely ineffective over the years. Prosecutors say cigarette smuggling is a multimillion-dollar business, ranking second only to drug peddling in the interests of organized crime.

The city, which had no local law against cigarette smuggling until the new statute, was viewed as "an exploitable area," according to D.C. Assistant Corporation Counsel Larry McClaffery, who aided Assistant U.S. Attorney James F. Hibey in Barry's prosecution.

National investigations into cigarette smuggling has centered on southern and eastern tobacco-growing states and in northeastern states where cigarette taxes are as much as 10 to 20 cents higher perpack.

A large scale investigation and prosecution effort is continuing in Philadelphia where one man has pleaded guilty to violating the federal law. Other investigations are being pressed in New Jersey and New York.

Paul Montefore, of Staten Island, N.Y., who helped Barry load cigarettes was arrested but later released after he cooperated with prosecutors. He has since disappeared, prosecutors said.

Berry has previously been convicted and fined under state laws for cigarette smuggling -- in New Jersey in 1974 and in Virginia in 1978, prosecutors said.