WRAL Investigates

ATF: Cigarette smuggling an ongoing problem in N.C.

Posted June 10, 2010

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— Agents with the federal Bureau of Alcohol, Tobacco, Firearms and Explosives say they have not even "scratched the surface" when it comes to cigarette smuggling in North Carolina.

One of their biggest cases involved a business that operated from a loading dock off Gresham Lake Road in north Raleigh from 2002 to 2005. The operators made millions, according to ATF.

ATF undercover video of cigarette smuggling in Raleigh ATF undercover video of cigarette smuggling in Raleigh

Raleigh agents worked undercover on the case, beginning in 2004, to track shipments and catch suspected smugglers in the act. Agents say smugglers will sometimes risk the prison time for the money they can make.

“As far as tobacco diversion, this is probably the biggest case we’ve worked,” said David Riddleberger, resident agent-in-charge of the ATF's Raleigh field office. “They had multimillion-dollar homes in California. They had expensive luxury vehicles. Everything was cash-based.”

The ATF documented the pick-up at a cigarette wholesaler, the drop-off at the loading dock off Gresham Lake Road and the delivery in California.

See ATF's pictures from the investigation in California.

The case eventually produced convictions of Avedis Djeredjian and Masis Geragosian. Yet, ATF agents say the elements that make smuggling attractive in this state still exist.

“The tax rate on a carton or a pack of cigarettes is significantly less (in North Carolina) than the rest of the country,” said ATF Supervisory Special Agent Earl Woodham.

See other states' tax rates on cigarettes.

The tax was 5 cents a pack, compared with California's 87 cents, during the investigation. North Carolina's tax is now up to 45 cents a pack, but that's still one of the lowest rates in the country.

North Carolina is one of the three states that don’t require a stamp to prove that state tax was paid – South Carolina and North Dakota are the others – and the smugglers were able to counterfeit tax stamps in California and sell cigarettes for $8.20 profit on every carton.

“The (North Carolina cigarette) pack is bald. It could be from anywhere,” Woodham said.

North Carolina lawmakers are considering a tax stamp for packs of cigarettes.

Area ATF agents said they have investigated four cases in the past eight years that resulted in federal convictions. That does not include cases that were referred back to the state for prosecution nor any of the ongoing illegal cigarette investigations, according to Woodham.

Cigarette smuggling big business in N.C. Cigarette smuggling big business in N.C.

Prosecutors say Djeredjian was the ring leader in California. Geragosian worked for him in North Carolina and had a cigarette distributor license from the North Carolina Department of Revenue.

His monthly reports to the Department of Revenue showed thousands of cartons going to a business in Los Angeles. In reality, the address was a storage unit.

At one of Djeredjian's California storefronts, ATF agents found counterfeit stamps hidden in the ceiling. Agents say it was a clear case of personal greed, but that is not always the motive.

“We know that the money can go toward organized crime or terrorist organizations,” Woodham said.

In 2002, two brothers were convicted in Charlotte of smuggling cigarettes to Michigan to fund suspected Hezbollah terrorists.

Wholesalers like JR's and tobacco companies like Phillip Morris try to warn to ATF agents to suspicious purchases as well, agents said.

The paper trail, the money trail and the tobacco trail are time consuming to track, and the ATF says it's overwhelmed.

“We constantly have investigations open,” Woodham said. “We don’t know that we’ve even scratched the surface.”

For his cooperation, Geragosian received two years on probation and had to pay approximately $20,000 in restitution. Djeredjian, the accused ring leader, is behind bars for seven years and has been ordered to pay more than $6 million.

It's unclear if the two men are in the country legally. U.S. Immigration and Customs Enforcement officials said they were part of the investigation but could not answer WRAL's question about the men's status in the U.S.

24 Comments

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  • Alexia Jun 11, 4:31 p.m.

    nanasix, you make all of this sound so evil and horrible. It's just cigarettes. What real "crime" was there? Well, one is that people were here illegally. Second, taxes were not being paid. But, that's not NC's issue. That's the issue of another state. Otherwise, I see this as nothing more than buying a product and selling a product. What one does with ones profit is a whole other issue. It could just as well be done with imported Chinese goods, like toasters. Really, must we chase down people selling tobacco across state lines? Why waste the tax payers' money for this?

  • nanasix Jun 11, 3:11 p.m.

    This has been going on for years. I have the hand written ledger of Fawzi N. Asmar, who was in our country illegally for over 10 yrs. He and his brother Georges N. El-Asmar were all part of the cig smuggling from NC to Michigan. Georges also drove an 18 wheeler, probably smuggling cig's to California for this crew. He had been roommates with Haisam Nashar (Sam) in Charlotte. Sam got caught at the airport in St. Louis,Missouri with $375,000. in counterfeit cig stamps in his briefcase, and ut his deal giving up the names of those that broke off from his operation (Mohammoud Hammoud)et al. Then Georges got caught in Mich. cut his deal giving the same 18 names, and they both kept walking. Always felt Fawzi N. Asmar (George's brother) was part of GEorges deal, as he was part of the smuggling, and was here illegally for ten (10)yrs. He was smuggling cig's, laundered the money in opening his own business, buying land, and funneling large sums to Mohammoud Hammoud (Hezbollah), committed bigamy

  • 68_polara Jun 11, 12:52 p.m.

    "or cut a large amount of programs to prevent from operating in the red."

    Good idea, let's start with the ATF.

  • Alexia Jun 11, 12:52 p.m.

    Is this whole issue over whether a state tax is paid? Really? I didn't hear anything else that was of concern. Somebody please explain why this warrants an investigation by federal agencies. If they broke the law, I am of the mind it's a pretty stupid law. If they failed to pay taxes in CA, then that ought to be a state issue in CA.

  • Travised Jun 11, 12:46 p.m.

    What the government is upset about is not getting their taxes. They will NEVER ban tobacco. Most of the states are dependent on the huge income from tobacco taxes. Similar with alcohol. The tax revenue from those two is massive.

    Seriously, imagine if there was no tax on tobacco or alcohol. The states and federal government would have to either raise property taxes by double digits, or cut a large amount of programs to prevent from operating in the red.

  • ncguy Jun 11, 12:05 p.m.

    well cory that is one way of looking at it. How about the next time you buy a beer they tax you the same rate.

    quit drinking

  • ncguy Jun 11, 12:02 p.m.

    well that's what happens when you tax some so much.

    I'm a smoker and if I knew where I could buy some bootlegs well.....

  • Hans Jun 11, 11:33 a.m.

    Alcohol, Tobacco, Firearms and Explosives should be a store, not a government agency.

  • aspenstreet1717 Jun 11, 10:46 a.m.

    If they're paying tax to NC should we not be encouraging them to buy as many as they want???

  • 1trhl Jun 11, 10:08 a.m.

    Didn't they smuggle cigarettes from NC on the Sopranos?

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