Tobacco Road

Late one muggy afternoon last month, two men carrying bulging paper bags got out of a 1975 Mercury Marquis, walked up to a cigarette wholesaler's warehouse in Queens, pushed a bell above the steel door and were admitted. A few minutes later, another man rang the bell. "Whaddaya want?" he was asked over an intercom. "This is Jerry. I came to pick up the order," said the caller. "It's too late. I can't give you the stuff," said the voice, clicking off. The caller made a quick gesture to a building across the street. Out stepped Patrick Vecchio, assistant director of the special investigations bureau of the New York State tax department, carrying a bullhorn. "We are state investigators," announced Vecchio over the amplifier. "Open the door."

Thus began the most successful series of raids that Vecchio and his men have ever carried out. Their quarry: cigarette smugglers. Inside the warehouse, they found three tax-stamp counterfeiting machines--two still in the paper bags brought by the men from the Mercury, the third already mounted and in operation. Fanning out, Vecchio's men raided four other tobacco distributors, confiscated 50,000 cartons of cigarettes and arrested eleven men--including three major wholesalers and Murray Kessler, 52, identified by police as a high-ranking member of the Vito Genovese mob. But, says Vecchio, "it was only a drop in the bucket."

That is right. Cigarette bootlegging --"buttlegging" to police--is a multimillion-dollar business. It is a phenomenon of the past decade, when hard-pressed state governments discovered that levying stiff cigarette taxes was a politically painless way of raising money. The taxes, however, are easy to evade. Buttleggers, according to one police source, now smuggle nearly half a billion cartons a year--or one-sixth of all cigarettes smoked--into 42 high-tax states. The Council Against Cigarette Bootlegging, an organization financed by the tobacco industry, estimates that 44 million cartons will be smuggled into New York State alone this year, at a cost of $110 million in lost tax revenue.

In New York City, where cigarette taxes have grown from 9-c- to 23-c- a pack since 1965, some experts believe that half of all cigarettes sold are contraband. The number of legitimate dealers has been cut in half, and those that are left are either going broke or salting their stocks with untaxed packs. Says Murray Baratz, Secretary-Treasurer of the tobacco distributors' workers' union: "If nothing is done to correct the conditions, there will be in the very near future only bootleggers."

The principal source of bootlegged cigarettes is North Carolina, where tobacco is king and the state tax is only 2-c- a pack. On one 100-mile stretch of highway, known locally as "Tobacco Road," there are more cigarette dealers than pine trees, and their lots are jammed with out-of-state cars loading up for the run north. Profits average $1.25 a carton and the risk is relatively low: according to police, the odds against getting caught are 200 to 1.

Small operators, although still numerous, are being muscled out of the buttlegging business by organized crime. Police say all five of New York's Mafia families have moved heavily into the business, and that their profits from the illicit trade now approach $100 million a year.

Elusive Racket. The Mob's operation is highly sophisticated. Some families are believed to own North Carolina dealerships, which supply them with cigarettes free of the North Carolina tax stamp. Their trucks are equipped with two-way radios and escorted by scout cars on the lookout for police. On a typical run, the cigarettes are loaded onto giant tractor-trailers capable of hauling as many as 60,000 cartons at a time. As they near their destination, they are transferred to smaller trucks to reduce the risk of detection and the loss in case of seizure. Once in New York, some of the cigarettes are sold at cut rates--often 350 a pack below normal retail prices--by underworld operatives in bars, offices, factories, beauty parlors and apartment buildings. Others are marked with counterfeit tax stamps and distributed to ostensibly legitimate retail dealers. The counterfeiting, say state authorities, is often so expert that it can be detected only by laboratory tests.

Against these dodges, police are all but helpless--partly because of budget and personnel cuts, although it is difficult to see how even vast hordes of police could stop this particular, elusive racket. Also there has been a concerted lack of interest on the part of the courts and state prosecutors. Only nine buttleggers were sent to jail in New York City last year--seven of them for three months or less.

A New York State task force of police and tax officials conducted hearings last spring, then issued three recommendations: tax laws should be stiffened, police should be given more money and enforcement powers, and cigarette taxes should be slashed by as much as lOc a pack to reduce the smugglers' incentive. The last proposal is probably Utopian. Cutting taxes might well reduce the buttleg traffic, but it would also cost the state an estimated $33 million a year in lost revenue--assuming, of course, that the buttleggers do not take over all the business.

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