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Cigarette smuggling attracts organized crime in Virginia.
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Date published: 9/6/2012
RICHMOND--What kind of illegal smuggling has the highest profit margin for criminals? Moving heroin? Cocaine? Guns?
No. It's cigarettes.
Cigarette trafficking has become so lucrative that it is attracting organized crime and former drug smugglers, Virginia Crime Commission staffer Stewart Pettoe said on Wednesday, during a report to the commission on cigarette trafficking in and from Virginia.
He quoted an unnamed Virginia State Police agent as saying the profit margin on illegally trafficked cigarettes is now higher than on cocaine, heroin, marijuana or guns. A Wall Street Journal article from 2009 cited at least one incident in which criminals were willing to trade cocaine for cigarettes--that's how high the profit margin is.
Pettoe said cigarette smuggling has existed for years. But as the discrepancy among states' tax rates has widened in recent years, the problem has worsened.
"We see data in the field that just in the last year it is blooming in the commonwealth," Pettoe said.
That's because Virginia has the second-lowest cigarette tax in the nation, at 30 cents a pack (2010 figures give Missouri's tax as the lowest, at 17 cents). Every state to the north has a higher tax, and by the time you reach New York state, the tax is $4.35 a pack.
Adding on federal taxes and other costs means that a carton of Marlboros that costs about $40 to $45 in Virginia costs more like $120 to $150 in New York City.
Truck 1,500 cartons of Virginia-bought cigarettes to the Big Apple and you could see a $100,000 profit. That's assuming you even take legally purchased cigarettes; traffickers also deal in cigarettes without Virginia tax stamps, as well as counterfeit cigarettes and those with counterfeit stamps.
Trafficking doesn't even require obvious equipment. A car can carry 10 cases (600 cartons) of cigarettes, Pettoe said--with a New York profit of about $34,000. Rent a U-Haul and pack it with 200 cases, and the profit could be about $670,000.
Looking at that math, Pettoe said, it's no wonder criminals are attracted to cigarette smuggling.
"The temptation is there and it becomes irresistible for criminals," Pettoe said. "You can easily make $300,000, $400,00 on one trip."
And Virginia is the source for many of the trafficked cigarettes.