2007-12-07 / Community

Weiner Links Illegal Cigarette Sales To Terrorism

Representative Anthony Weiner, a member of the House Judiciary Committee, has renewed his call for stronger federal laws to curb the widespread illegal sale of tobacco after a federal judge dismissed all but one count in a lawsuit filed against Indian reservations who sell tax-free cigarettes.

The court decision in Brooklyn dismissed the claim that the illegal cigarettes "created, fostered, and nourished a thriving black market," even though the selling of illegal cigarettes is a technique used by terror groups such as Hamas and Hezbollah to finance their activities. According to a recent Government Office of Accountability (GAO) report, Hezbollah profited $1.5 million from the sale of illegal tobacco from 1996-2000. Weiner has requested Congressional hearings to examine this national security issue.

There is a high variability between the excise taxes on cigarettes in different localities. This creates a highly lucrative market for individuals to purchase cigarettes in one locality and transport them to another locality for resale, below market value, evading the local sales tax. The Independent Budget Office (IBO) estimates New York City loses $40 million per year in tax revenue due to the illegal tobacco market.

Also, cigarette wholesalers legally sell tax-free cigarettes to Native Americans living on reservations, which are being illegally resold taxfree on the Internet to non-Native Americans. Since 2002, when New York increased the tax on cigarettes 39 cents to $1.50 a pack, the number of tax free cigarette packs sold to Native Americans living on New York reservations has risen from 280,065,310 packs in 2002 to 360,145,380 in 2006, an increase of 22%. Of the 105 domestic tobacco retail websites, 60 are by Native Americans.

A survey conducted in 2006 by the state's Department of Health found that nearly half of the smokers interviewed in New York City said that they had bought illegal cigarettes within the year.

The profit in illegal tobacco schemes has been used to fund organized crime and terrorist groups. The federal Bureau of Alcohol, Firearms, Tobacco and Explosives has said that eight years ago there were only 100 such investigations, now there are several hundred in New York State, several with links to extremist groups such as Hamas and Hezbollah.

Reports of tobacco smuggling by individuals with ties to terrorist or organizations include:

June 21, 2002: A federal jury in North Carolina finds Mohamad Hammoud guilty of cigarette smuggling, racketeering, and money laundering.

Hammoud and his brother smuggled $7.9 million worth of cigarettes from North Carolina to Michigan. Together they steered profits from their multimillion dollar cigarette smuggling operation to Hezbollah.

May 1, 2003: 10 men of Middle Eastern descent are arrested in New York and Virginia for possession of 71, 467 cartons valued over $2.2 million, wire fraud and money laundering. Federal government opens investigation into suspected ties with Hezbollah, a man linked to the case reportedly was found with wire transfer receipts linking him to the terror organization.

May 29, 2005: 19 men in Dearborn, Michigan are arrested and federally indicted for a smuggling operation that evaded "tens of millions in state cigarette taxes" and funneled illegal proceeds to Hezbollah. Most of the smuggled cigarettes were sold in Michigan and New York.

September 20, 2006: Karim H. Nassar from Windsor, Canada pleads guilty to tobacco smuggling and trafficking $500,000 of cigarettes from Cattaraugus Indian Reservation in New York State to North Carolina, Kentucky and Michigan. Some of the profits were sent to Hezbollah.

October 5, 2007:ATF agent Patrick Awe tells a Senate committee that "the link to terrorism has been established" and proceeds from some of the counterfeiting schemes had ended up going to groups like Hezbollah or organized crime groups that have the financial resources to run sophisticated operations.

Weiner recently introduced the Prevent All Cigarette Trafficking Act of 2007 (PACT), legislation which closes loopholes in current tobacco trafficking laws and provides law enforcement with new tools to combat the innovative new methods being used by cigarette traffickers to distribute their products. The legislation contains the following measures:

Strengthens the Jenkins Act - Increases existing penalties from a misdemeanor to a felony, making it a federal offense for any seller making a sale via telephone, the mail, or the internet to fail to comply with all state tax laws.

List Enforcement - Empowers the Attorney General to compile a list of delivery sellers who fail to comply with this act or states' tax laws. Common carriers and the United States Postal Service are prohibited from making deliveries for non-compliant sellers on the list.

Age Verification - Requires internet and other remote sellers to verify the purchaser's age and identity through easily accessible databases. Requires the person accepting delivery to verify their age.

Tobacco as Non-Mailable Matter - Makes cigarettes and smokeless tobacco products non-mailable matter through the U.S. Postal Service.

ATF Inspection Authority - Grants the Bureau of Alcohol, Tobacco, Firearms and Explosives inspection authority for distributors of cigarettes and creates a penalty for those who refuse inspection.

Also, in a letter to Representative Robert Scott, Chairman of the Subcommittee on Crime, Terrorism, and Homeland Security, Weiner has requested Congressional hearings into this threat to national security, writing, "I urge the subcommittee to convene a hearing to explore the extent to which cigarette smuggling and online sales funds terrorist groups. I also hope that the discussion will extend to steps that Congress can take to cut off this source of revenue from terrorist groups."

"We must crack down on the illegal sale of tobacco which gives terrorists and criminals the ability to raise more money," said Weiner. "Every day we delay is another day that kids have easy access to tobacco products sold over the Internet."

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