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Illegal Cigarettes and Organized Crime & More

img_01251WASHINGTON —One recent weekday, in a downtown Washington office building, Edgar A. Domenech, head of the ATF Washington Field Division, sat down to talk with ticklethewire.com editor Allan Lengel.

Domenech, a 24-year veteran of the ATF, talked about a variety of subjects ranging from methamphetamine traffic to white supremacists to motorcycle gangs. But what seemed to be particularly interesting was the proliferation of illegal cigarette trafficking and organized crime’s growing interest in it.

Domenech says in many instances, traffickers are buying low tax cigarettes in states like Virginia and selling them at cheaper prices to stores in New York, which normally pay much more because of the higher New York cigarette taxes. Sometimes the traffickers are buying counterfeit cigarettes made in China, which have not been taxed at all.

Just how lucrative is the black market cigarette business? In one ATF undercover operation, Domenech said, some cigarette traffickers traded more than two pounds of cocaine for a load of cigarettes. “That they’re willing to trade a kilo of cocaine for a truckload of cigarettes tells you they were going to make more money trafficking cigarettes than cocaine,” he said.

The following is a condensed interview. The questions were edited for clarity.

What has ATF’s role been with the trafficking of illegal cigarettes?
We’re very active in investigating cigarette trafficking here in the Washington field offices. In fact, we’ve taken off several organizations. We just recently had a group of Koreans in the Arlington, Falls Church area that were trafficking cigarettes from here to New York and that was organized crime in the Korean community. Working with Fairfax County and some of our other state and local partners, we actually worked that investigation with some undercover agents.

How does that all work, how do they get a hold of the cigarettes?
What’s happening is those individuals are looking to purchase what they believe to be untaxed cigarettes or cigarettes at a lower cost. Traditionally our investigations have been up to New York, where New York had a very high tax per carton and the profit is such, it makes it very very advantageous. There’s an increase in organized crime , whether it’s Korean organized crime or Russian organized crime , that are getting involved in the trafficking and buying cigarettes.

Which are the source states?
North Carolina, Virginia. Based on the fact I’ve got several field offices in Virginia we have taken advantage of the fact, we have a lot of individuals who come down to Virginia looking to purchase cigarettes . We take advantage of that greed element to basically insert ourselves in these criminal investigations .

Are you seeing some nexus with terrorism too?
Right now we’re seeing a nexus to organized crime. But again we have seen in some of our older cases that terrorist have in fact looked to use the trafficking in the cigarettes as a way to fund their organizations because the profit margin is so large.

When we talk about a profit margin what are we talking about, the initial output for the trafficker?
We can look at it this way, you can come down to Virginia and you can buy, let’s say, a van load of cigarettes, you can fill up a back of a van that you rent; it’s probably going to run you anywhere from 6 to $9,000 dollars. You can take that and sell that in New York for maybe 60 or $70,000 dollars. It’s a very good profit margin and again if you’re caught, the penalties are very low. It’s a white collar crime right now. For trafficking in cigarettes, you’re going to be on the low end of the sentencing guidelines, you may get probation the first time. The problem we’re seeing now is organized crime and other violent groups have become aware of the profit margin and when you get such a large profit margin, then the violence associated with those individuals who want to monopolize that area becomes a concern to us.
That’s why we work very aggressively in that area, in fact just two weeks ago we did a reverse where we traded cigarettes for cocaine. Out of New York. A kilo.

Is that common?
No, the trading of cocaine for cigarettes of that quantity is the first time we’ve done that in this field division. We’ve done smaller quantities. That they’re willing to trade a kilo of cocaine for a truckload of cigarettes tells you they were going to make more money trafficking cigarettes than cocaine.

How much quantity did you buy?
That was a six or seven month long operation . We had done several buys with them, just cigarettes alone. And they offered that they had kilo sized weight. We took them up on the offer. Again, we met them through cigarettes, not drug trafficking.

Were you surprised that they wanted to trade that much cocaine for cigarettes?
I am no longer. With the amount of tobacco diversion that I have seen just explode across the the country in the last two, three years, absolutely not. I can very comfortably say that trafficking of cigarettes has transcended state lines and agency jurisdictions. We’re involved more with the FBI and ICE involving cigarettes trafficking cases than ever before.

How far are people coming to get cigarettes in Virginia?
In field division, they’re coming from New York. Traditionally it’s going on from your high tax states, the northeast area. The larger issue is you have a large amount of counterfeit cigarettes coming into this country. Traditionally they look like Marlboros but they’re not made by Marlboro. They’re made in in factories outside the United States. China has one of the largest trafficking of counterfeit cigarette factories, that we’re aware of. Unfortunately what you don’t know, what are those cigarettes made of. So there are the unknown health implications. Again they’re untaxed and that’s lost revenue. I think there was a study done in California at one point that 60 percent of the Marlboros in California were counterfeit.

Are you seeing some of those counterfeit cigarettes here?
We’re seeing counterfeit cigarettes throughout the United States. Here in the Washington field division, in our investigations, we’ve seen counterfeit cigarettes.

How do they generally arrive?
Smuggled in through ports in trailer loads, this is cargo type.

Are they dangerous?
They are dangerous, again (we’re) not sure what’s in some of them. What kind of chemicals are in there ? Are there insecticides in there? I know we have a very good relationship with Phillips Morris, who has a genuine, legitimate concern to assure these counterfeit cigarettes are taken off the market.

Are they hard to detect on the street?
They’ve become more and more sophisticated in disguising the counterfeit cigarettes. Some of these organizations have done so good at disguising fake Marlboros from real Marlboros, even some of my agents who have worked investigations can’t tell the difference. Than how’s the general public going to know the difference?

Do they have a whole distribution network?
Absolutely.

Is it all Chinese?
No. They have the opportunity to utilize the facilities in China, but we’re seeing factories in central America, there’s activity in Panama, there’s activity in Africa now. These are individuals where again the organized criminal elements has taken advantage of these areas. Again these products are counterfeit.

What are the tell tale signs of a fake Marlboros?
Well, like I said they’re getting harder and harder to tell. At the end of the day the only way you can tell is when you smoke them, the quality will never be the quality of a true Marlboro. But the packaging has gotten so good. You just think you got a bad pack when you smoke it, so you may throw one out. The quality will always be different. That’s the profit margin for them. It’s not the quality tobacco. Some of the time the amount of tobacco in the product is miniscule. It’s filled with filler. There can be chemical products, the remnants of animal feces. Again, no quality controls.

In terms of country like China, are they being cooperative with U.S. law enforcement?
I know this issue is discussed but again as to the level of cooperation, from my level I don’t get involved in that. I know its been an ongoing discussion. We have a very good working relationship with the European law enforcement community. They are seeing, what’s not going into this country is going to Europe.

Do you have active cases?
We most certainly do. We have active ongoing investigations that have tentacles into Europe, China, South America, Africa and just about every state in the union.

Are the foreign governments giving the counterfeiters the nod, telling them to do their thing? Are the governments involved in some of them?
Again, I would have to say when they’re operating in the amount of product that is being introduced in some of these countries, you have to ask yourself: ‘How are they able to do this?’

If someone were to get involved in this business. What is the price difference, if they wanted to buy a counterfeit cigarretes as opposed to a low state tax pack?
It depends what low state tax you’re in. If you’re in the Carolinas, you could be looking at several dollar difference. And that’s where the counterfeit cigarettes problem occurs. From the very inception, there’s no tax. If you don’t know they’re counterfeit, the bad guys aren’t telling you you’re buying counterfeit cigarettes cause they’re getting that good.

Are you finding a lot of guns in connection with cigarette investigations?
We’re seeing these guys are more violent, they’re carrying firearms when they meet with us.

When we talk about organized crime, are we also talking about traditional organized crime?
We’re talking the matrix, from Italian organized crime to your Russian organized crime. Here we’re seeing your Korean. We’re seeing the Russians and the Koreans and your traditional New York style family, I’m sure are involved. We may not be working them, but I’m sure there’s some other ATF office working it. I think what we’re seeing here, the Koreans were purchasing the cigarettes from us and taking them to New York so there’s a relationship between Korean organized crime here and their ability to move it. They were taking them to the Korean community up there. Our concern is you’re going to see an increase in the level of violent crimes.

Are you seeing any nexus with legitimate business people?
Yes, we’re seeing legitimate wholesalers and distributors involved in the divergence of cigarettes and we’re aggressively pursuing them as well.

When you say diverting, are you talking about taxed cigarettes?
Yes.

Are you seeing any actually willing to buy the knockoffs?
What we’re seeing is that they’re willing to move untaxed cigarettes. Whether or not they’re knowingly aware of the fact that they’re ‘counterfeit or not , that’s hard to say.

What about White Supremacist groups? There seems to be a presence in this region like West Virginia and Virginia.
There’s still appears to be small cell groups out there of those hate groups. We continue to monitor those groups of violation of ATF violations.

Are they very active?
Right now from what we’ve seen in discussions with out state and local partners, there’s a lot more of what we call rhetoric right now. You see a lot more email and website activity . I think that draws concerns because when you see an increase in that activity there’s usually something behind it. We’re being due diligent. We have not presently initiated any current investigations. But again we monitor what our state and locals and what informants are bringing us to determine whether or not there’s an interest for ATF and if there’s’ an interest to push that information to the FBI.

There’s a lot of reports that after Obama was elected or even during the campaign, there seemed to be more chatter.
I’ve heard the same thing, there’s a lot more chatter on these website, these blogs, basically indicating the hateful rhetoric.

Are there problems with motorcycle gangs in this area?
There has been an uptick in activity , not necessarily in the D.C. area, but in the state of Viringia. We’re starting to take a look at it. We’re looking to see potential violations, firearms violations. We are seeing an uptick in new club chapters, whenever you see that, it behooves all of in law enforcement to get together and exchange information and see whether or not there’s a need for us to collectively look at some of the activity.

Methaphetamines seems to be a big thing, particularly in Virginia in the rural areas. What are you seeing out there?
We are seeing an increase in meth cases. We are getting called by the DEA or whether it’s state or locals in the rural area, more so than the District of Columbia.

Are we seeing labs?
We are not.

The customers, who are the targets?
It’s traditionally, it’s going to be your lower income, white males, white females.. On the lower economic scale.

Any surprises in general of the guns recovered in the region ?
There isn’t a surprise in any of the guns, but what has changed, the majority of firearms that are recovered in the District of Columbia that are crime guns, are actually from the date of purchase to the date of recovery over three years old. What that’s telling us is that the District of Columbia doesn’t have a traditional trafficking environment where they’re getting new guns in. What’s happening happening is a lot of older guns are getting recovered. For us, we’re trying to understand that, and understand how that illegal market is actually operating here in the District, which is a challenge to us.


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Comment from cv60pao
Time May 4, 2009 at 8:18 pm

he looks like he is sitting on the papal throne. A white, formal chair ? get out of your digs domenechi and hit the street!!! BTW I thought he retired years ago when he suddenly was yanked from the NY Field Office.

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Time May 5, 2009 at 2:00 pm

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Comment from tpaustin
Time May 18, 2009 at 4:53 pm

Yanked from NY? He was promoted to Deputy Director. Write something useful next time. IdJit.

Comment from queenie
Time June 2, 2009 at 1:20 pm

No need for ad hominem name calling tp but then again apple polishers and boot lickers have to make themselves useful in some way. DD to SAC, I’d say thats a demotion..Maybe that CHAIR is from the former Director Truscott’s new HQ furniture collection. The interview was what is wasteful. Alot of hot air and bromides.

Comment from tpaustin
Time June 8, 2009 at 1:47 pm

Apple polishers? So much for the “ad hominem” retort. I dont even work there. If you had read the post, you would have noticed that Idjit got it wrong. Domenech wasnt DD in NY.

Comment from sanantoniosue
Time June 10, 2009 at 10:16 pm

The Fed gov’t has subsidized tobacco growers for centuries. NE states have overtaxed tobacco products as a revenue producer. Tobacco is addictive. Domenech said he could piss on any white man on the job. tpaustin keeps checkin back on his comments. An underassigned napolonic facile man is playing enforcer for a govt created arbitrage situation. get a life

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