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Post date: November 8 2005

Thirty-one Indicted In Cigarette Tax Fraud Investigation

New York State Attorney General Spitzer, Schenectady County District Attorney Robert Carney, New York State Tax Commissioner Andrew Eristoff and New York State Police Superintendent Wayne Bennett today announced that a Schenectady County Grand Jury has issued a 375-count indictment charging 31 people with tax evasion and other crimes in connection with a scheme to sell untaxed cigarettes.

The investigation began in 2004, when investigators assigned to the Tax Department’s Cigarette Investigation Tax Enforcement Program (CITE), uncovered evidence that several Capital Region merchants were selling untaxed cigarettes. Undercover investigators, posing as out-of-state distributors with access to large quantities of untaxed cigarettes, were able to infiltrate the group, and were soon being contacted by multiple merchants across upstate New York seeking the illegal product. The undercover tax agents were also sold marijuana and firearms in exchange for the contraband cigarettes.

"Today we are announcing the results of one of our efforts to attack the problem of cigarette tax evasion at the retail level. Working with the State Department of Taxation and Finance, the State Police and local prosecutors, such as District Attorney Robert Carney, my office is determined to crack down on tax cheats, and to level the playing field for the honest merchants in our communities," Spitzer said.

The multi-agency effort complements previous Attorney General prosecutions in which foreign nationals were arrested for smuggling bulk containers of untaxed, cigarettes through New York harbor, and a recently announced agreement secured by Spitzer’s office with one of the state’s largest cigarette tax stamping agents to stop supplying unstamped cigarettes to companies that illegally resell them over the Internet or by mail.

District Attorney Robert Carney said: "The black market in cigarettes has become extremely lucrative and unfair to honest retailers. I am pleased to lend my assistance to this regional initiative by Attorney General Spitzer that potentially will result in the seizure of more than one million dollars in ill gotten gains."

Commissioner Andrew Eristroff said:"This indictment is representative of the success that Tax Department investigators have had in teaming with the Attorney General, State Police and other law enforcement agencies to remove contraband from the streets. In addition to bootleg tobacco, we also removed illegal drugs and firearms before they posed a greater threat to the community. Trafficking in untaxed cigarettes is not a victimless crime, and the Tax Department will continue to work diligently to prosecute cigarette tax law violators as well as associated tax crimes that concern all residents of the Empire State." (more)
New York State Police Superintendent Wayne E. Bennett said: "As with many criminal operations, this one involved several illicit activities. In addition to dealing in untaxed cigarettes, this operation dealt in the sale of marijuana and illegal guns. Through the well coordinated efforts of state and local law enforcement, this 18-month investigation has culminated in the indictment of 31 individuals on hundreds of criminal counts."

Twenty-three defendants were arrested October 26, 2005 during an undercover rendevous at a storage locker located in Schenectady. Approximately $176,000 in cash, 7 vehicles, and quantities of marijuana and cocaine were seized during the operation. An indictment naming 31 defendants was unsealed in Schenectady County Court on November 4, 2005. Additionally, pursuant to a civil forfeiture case filed by the Attorney General’s Office, an order has been obtained authorizing the seizure of up to $1.4 million of the defendants’ assets.

The charges are merely accusations and the defendants are presumed innocent until and unless proven guilty.

The matter is being prosecuted by Assistant Deputy Attorney General Michael Sharpe of the Organized Crime Task Force, under the supervision of Christopher Prather, the Deputy Attorney General in charge of the Task Force. The Cigarette Smuggling Enforcement Unit of the New York State Police; and the Petroleum, Alcohol and Tobacco Bureau of the New York State Department of Taxation and Finance assisted in the investigation. The Bureau is led by Thomas Stanton and Paul Rossi.