Cigarette Trafficking & Smuggling
Federal law prohibits the trafficking of contraband cigarettes across state lines and makes it unlawful for any person knowingly to make any false statement or representation with respect to the information required by this chapter to be kept in the records of any person who ships, sells, or distributes any quantity of cigarettes in excess of 10,000 in a single transaction. A person who violates federal law can face either up to 3 years or up to 5 years in prison, in addition to other penalties. In addition, the misuse of proceeds of this conduct often constitutes money laundering, which is punishable up to 20 years.
Contraband cigarettes are a quantity in excess of 10,000 cigarettes, which bear no evidence of the payment of applicable State or local cigarette taxes in the State or locality where such cigarettes are found, if the State or local government requires a stamp, impression, or other indication to be placed on packages or other containers of cigarettes to evidence payment of cigarette taxes, and which are in the possession of any person not otherwise authorized by law.
Oftentimes these schemes involve the acquisition of large numbers of cigarettes from a North Carolina or other low-tax state warehouse where the affixed stamp, if required, indicates that the appropriate tax has been paid in that state. But, instead of selling the cigarettes in the state where the tax was paid, members of the conspiracy will ship the cigarette to high-tax states, in which they are either illegally sold on the street corner, or sold in bodegas or convenience stores by retailers who have not paid the full tax.
The conspirators pocket the difference between the tax paid in the low tax state and the price sold in the high tax state, and never pay the high-tax state the proper tax revenue required.
While individual states attempt to enforce their tax regimes, in the U.S. the federal government will prosecute cigarette trafficking cases because these conspiracies tend to be cross-border criminal affairs where single jurisdictions are unable to keep pace with the conduct.
The Chetson Firm has defended clients accused of either money laundering or cigarette trafficking or smuggling, and has worked to achieve excellent outcomes, including in preventing the seizure of assets that otherwise are potentially forfeitable to the government. Mr. Chetson has represent defendants of various backgrounds, particularly Yemeni or other Arab backgrounds who have been accused of these crimes, and has worked to try to avoid immigration consequences and the implication that the proceeds in these cases have gone to fund overseas terrorist organizations.