[Music] segment three this evening is an investigative report on bootleg cigarettes an organized crime operation of awesome size and enormous profits for criminals and the criminals as brian ross will show us are getting away with it the same people who run the heroin business in this country are not trying to take control of the cigarette business the mafia doesn't yet make cigarettes but it sells cigarettes hundreds of millions of packs each year and at prices lower than those of legitimate dealers in the states where tobacco has grown north carolina virginia kentucky cigarette taxes are low a carton of cigarettes cost about three dollars travelers from states where cigarette taxes are high save a couple of dollars in each carton by buying here the mob does the same thing except it buys millions of cartons at wholesale smuggles them into other states pays no taxes there and makes a big profit police say this is one of the places where the mob buys its cigarettes a building on a side road in a small north carolina town these pictures were made by nbc news at dawn with a concealed camera investigators say drivers who work for organized crime families in new york load cars vans and small trucks here with thousands of cartons for the trip north the smugglers move by night often changing vehicles and license plates as they travel from state to state a smuggler can make as much as five thousand dollars with just one car load of illegal cigarettes i i couldn't uh this man is an organized crime figure who is also an undercover operative for the federal government why is smuggling cigarettes such an attractive thing you do because it's uh it's no risk it's not a dangerous risk and there's a lot of might to be made and how are they running well they're smuggling them in uh by uh tractor trailers uh rented trucks or as i understand they had a connection with some of these trucks they used to come up from florida with the grapefruit and the oranges so instead of load them up that give a ample space there and fill the front up with cigarettes and the rest is covered up with fruit in new york city where there's a tax of 23 cents on a pack of cigarettes the untaxed cigarette smuggled in by the mob sell for much less than those distributed by legitimate dealers half of all cigarettes sold here are smuggled and it's almost impossible for the customer to know if he's buying legal cigarettes the mob counterfeits its own tax stamps a cigarette new york state tax agent sees this counterfeit tax stamp machine in a rate on an organized crime operation agents say these counterfeit stamps were so good that with this one machine the mob was able to cheat the state out of six million dollars in taxes cigarette smuggling is costing the state of new york an estimated 100 million dollars a year in lost taxes in texas the estimate is 43 million dollars in florida 35 million dollars in all 34 states report annual tax losses from cigarette smuggling totaling more than 350 million dollars most of it profit for organized crime [Music] what's up black sport lpd and law enforcement has done little to control the smuggling one team of state tax agents in pennsylvania spent two days following suspected smugglers people we're in violation of cigarette tax act we're going to cite you first summary when they finally made an arrest this is all they got seven cartons of untaxed cigarettes somewhere authorities concede that the large organized crime smuggling rings are operating with little chance of being caught and now there are fears that the mob may one day control the entire cigarette industry ronan williamson tobacco chairman joe edens i can see them coming to me or to some of my competitors and saying if you don't conform to whatever their wishes might be you're just not going to fan brand x in a given major market and i fear that uh criminal elements could take over this industry completely yes who's calling the shots at the top of the operation the top people whoever the investors are it could be most anyone such confusion now with family so you don't know who the boss is today anyway they're banging them left and right in the last 18 months there have been more than a dozen gangland slains bodies found in trucks and fields in disputes over control of the cigarette smuggling racket in the new york area and the number of legitimate cigarette distributors have been forced out of business unable or afraid to compete with the mafia the wholesalers still in business in new york have hired armed guards to protect their employees all efforts to lower cigarette taxes and end organized crimes easy profits have failed almost no one thinks the police can stop the smuggling and what's happening now in the cigarette industry appears to be a classic case of how organized crime moves in and takes over brian ross nbc news new york the butt leggers is the story of cigarettes organized crime and your tax money it's safe to say that everyone complains about taxes well one way to squeeze the money out less painfully is through something called sin taxes on gambling horse racing liquor and cigarettes but the butt leggers steal your tax money we begin in the smoke shop in the cbs building in new york this pack of cigarettes cost 77 cents 23 cents of that amount is a special new york cigarette tax 15 cents of it goes to new york state 8 cents goes to help bailout new york city new york state and city are supposed to net about a half a billion dollars a year from cigarette taxes but they are losing at least a hundred million dollars a year of that amount why here's why north carolina why are cigarettes so cheap down here the manufacturers don't charge less they're cheaper because north carolina puts a tax of only two cents on each pack so a buyer driving down from pennsylvania saves 16 cents in taxes on a pack a buyer from florida 19 cents and if he comes from new york city he saves 21 cents a pack i bought 30 cartons how much do i owe you for all that 93 93 alrighty that includes all taxes yes sir that also includes the federal tax of eight cents a pack now i am permitted to buy as many cigarettes here as i want right yes sir fifty seventy ninety one two three i thank you very much man well i've just saved 63 in new york state and city taxes can you imagine if i had 30 000 cartons instead of just 30. i'm also illegal as soon as i cross the state line up there because if you smoke them across the state line you have to pay that state's tax now no one was upset much when mom and pop were illegal with only 30 cartons on a trip nor do police officials worry too much about this truck driver on his way back to florida he can pick up an extra two or three hundred dollars a week on the tax spread between north carolina and florida by selling cigarettes to his friends back home but it's big business when loads of thirty thousand cartons move regularly up tobacco road just one of these tractor trailers can turn an illegal profit of about a hundred thousand dollars per home just on the cigarette tax spread between north carolina and a high tax state and the mob knows it organized crime has found big money in bootleg cigarettes called the last estimate they have a net profit the present time of about 800 million dollars a year 800 million dollars a year from cigarettes that's right and now it's listed as the fifth largest thing that organized crime handles that's a pretty sad commentary as a matter of fact half the cigarettes in new york city are sold by the mob that's unbelievable william o'flaherty heads the tobacco industries tax council and he's worried that organized crime might eventually be able to dictate to the cigarette manufacturers what brands to produce because by that time the mob would control all distribution as things stand now there is little risk to the mob in expanding their cigarette operations there is virtually no risk why is the risk so low well first of all you got to catch them and that's the tough part because it would take the us army to catch them look at lincoln tunnel if you stopped every truck going through lincoln tunnel he topped new york for a week and even if you stopped them you couldn't do anything because you'd have illegal search and seizure so they throw it out of court i think the conviction rate is something like six tenths of one percent and what kind of sentences are they handing out there's one guy went to jail for 10 days one of commissioner james tully's jobs is to collect new york state cigarette taxes commissioner how many illegal cigarettes did your agency seize last year 110 000 cartons that's twice what was seized in some other years recently you know how many cartons a week illegitimate cartons come in i know it's uh a million i know i know and how much are you losing oh well we're losing a lot well the hussein city together is losing 100 million dollars i think and the problem has become nationwide this is another thing you know it used to be people used to think this was a new york problem so you know there's a lack of sympathy for new york's problems in some parts of the country but it's become a nationwide problem and if congress would act if they would make it a federal crime it would do what to make to transport cigarettes across state lines for the to sell them in a place where they're untaxed i can't understand it why it isn't a federal crime but the congress hasn't acted and so state revenue agents like kevin moran have to cope as best they can there are only 65 of these agents for all of new york state yet some of them have to go to north carolina for undercover work why undercover because in order to seize a load of bootleg cigarettes in new york you've got to witness the loading for instance in north carolina otherwise the case may not hold up in court these new york investigators have gotten a tip that a mob run truck is going to make a buy at this store in a small north carolina town but they don't know when so they wait in this van and they watch and they wait some more nothing doing yet huh oh that's fine i see that might get quiet here well you could be here for 16 hours 20 hours 24 hours and the guy don't show these agents in the van know it's perfectly legal for the folks inside the supermarket to sell huge batches of cigarettes and these agents are also aware that the store owners probably know all about the bootleg business and that they have no interest in cooperating with these new york officers but we're down here in the south now and that another one of our problems is let's face it we don't have any authority down here we're down in carolina and uh i have no authority like i would have in new york it turned out that while the new york agents were eyeballing the store the owner was eyeballing the agents he finally called in the local police who arrested the new york state agents and told them to get out of town some of the agents claimed the local police take care of the local merchants after all north carolinians make a lot of money from these cigarettes no matter another carefully planned operation went down the drain and another shipment of bootleg cigarettes reached new york how are the cigarettes handled once they hit new york not everything is run by the organized crime families there's some of the pie left for a few smaller racketeers the man with his back to the camera here mr t that's not his real name is one of those operators he's been arrested many times by pat vecchio's revenue agents but he's still in the racket he says he buys six thousand cartons at a time twice a week off the trucks from the south and he gets a big discount into the bargain okay he gets here with his six six thousand pieces his six thousand cartons and he brings them to us in the garage what do you pay for we pay him 255 something over fifteen thousand dollars right right and then we just distribute them to other customers that we have and how much do you sell them for 360 cars so you make a dollar five a carton right simple as that right and this of course you pay an income tax on this what are you laughing about it's clean no tax tax-free and you get 12 000 cartons a week so you're talking about ten twelve thousand dollars a week that's in profit right mr t is not only a bootlegger he's also an informer he gets a bounty of 20 cents from new york state on every carton seized as a result of his tips he also got a small bounty from us for telling us how he operates what happens if your friends find out that you are informing or if they knew who you were talking to us what kind of trouble physical trouble definite they're big guys they're probably giving me good feet is that all just a beating that probably even would kill me so there's a lot of money involved that's a big deal to them new york depends on informers like mr t these revenue agents are in a cemetery outside manhattan on a tip they've been staking out a bootleg operation in a small apartment building down that street how did you make sure which door the stuff was going in i rode my bicycle from a block away down that street down that street i rode down and fell off my bike sat on the curb and repaired my front wheel all the time observing the suspect until he went into the house and that's how we got the location of the house the agents didn't move in on the bootleggers right away because they wanted to see what happened to the thousands of cartons that came through here where they were sold and so the next few weeks were spent tracing that distribution network this day if everything goes according to plan a shipment from north carolina will be arriving in a few hours while we waited for things to happen the agents talked about the bootleg business and how violent it has become well twelve different bootleggers have been killed by whom there's the kind of murders that are never solved well what would be the motive for murdering a bootlegger who'd do it organized cars uh we're moving a hit man to do it this is like the old bootlegging days of prohibition and a guy will move in on another guy's territory and they'll let him go just so far and the next thing you know you find in front of a hospital or someplace or two in the back of the head morning became afternoon and still we waited it's now 3 35 in the afternoon we've been here for about six hours looks like nothing's gonna happen well our man's off his schedule but uh we're reasonably sure he's got to come here today maybe a little late but so far everything you still are gonna stake it out oh yes we will stay with it it was 7 p.m before the shipment was finally unloaded in the apartment thousands of cartons of bootlegged cigarettes all with north carolina tax stamps you have the right to remain silent anything that you do say may be used against you and while the suspect an illegal alien from greece was read his rights other agents told us what kind of operation was going on here these would be washed off with an epoxy solution yeah right here this little tack stamp which is what's in the caramel decal yeah this is this little stamp here right they take the stamps off the cigarettes from north carolina that way huh epoxy thinner right and then with that device which my partner has and this thing here they restamped the the cartons and cigarettes in other words you can stamp a whole carton with just this one stamp no partner he wants to go like that's correct in fact here he's got the boxes open prepared to stamp the cartons so you just put a little ink on this press it down just like that it turned out that ari here was just a minor cog in the bootleg scheme and he was scared are you afraid if you talk you're gonna be killed who knows an hour later we went with the agents as they raided one of the retail drops that sell the cigarettes in this store the fake new york stamps permitted the owner of mr blackhouse to sell the cigarettes at full retail price ever hear of the cigarettes in north carolina mr blackhouse no i don't know another one okay mr blackwell can you give me just a second behind the counter here we found this uh card from sharpsburg north carolina what do you know about this i don't know about this what it was was a business card from a big north carolina cigarette dealer and strangely enough in the back end of the store a parked motorcycle with north carolina plates the agents discovered that blacos himself held the lease on the apartment where the counterfeit tax stamps were printed on the cartons who's the fellow who was working with the cigarettes in your apartment out in 55th street fella who was who was stamping the cigarettes an idea about this really yeah the evening ended with lachos and his accomplices in custody and a counterfeiting ring that was defrauding new york state of hundreds of thousands of dollars in taxes was out of business for a while at least now you go in you make a bust you pick up these illegal cigarettes you convict anybody sure do you sure what they get for your conviction uh slap on the wrist a couple hundred dollar fine and they go back in the business right back in the invasion of the cigarette business by the mob is so successful that legitimate operators have been dropping like flies unable to compete and for the legitimate people left in the business there is a great temptation to make some easy money is it possible that some legitimate operators are now in cahoots with organized crime or fellas like him or is it possible it's more than likely this is the instrument of their cooperation it's machines like these that record how much tax money new york state and new york city are supposed to get from their cigarettes every time a carton goes through this fitness cigarette tax stamping machine two dollars and thirty cents in tax money is marked up a dollar and a half of the state eighty cents for the city two thirty two thirty two thirty but the revenue agents are now convinced that some formerly legitimate cigarette dealers are letting the mob tamper with these machines so they won't register the tax take in return the wholesaler split the profit with the mom he currently makes 10 cents of cotton in doing his business legally he now sees an opportunity to split 2.30 and do it ostensibly in a legitimate manner he's putting a counterfeit cigarette for all practical purposes that looks like a good cigarette it's greed so instead of making 10 cents a carton they're splitting 2.30 cents a copy so what's the answer we need the tax money but how to get it there's a solution that's so simple that no one will buy it but uh what's that it's just to increase the federal tax is it presently a federal tax uh eight cents a pack right on cigarettes make that tax 25 cents a pack and distribute the money to the states on the basis of their population or cigarette use or some equitable you want a federal tax on cigarettes 25 cents a pack right collected at the source right right manufacturing right that takes care of the problem well sure would it won't work why congress won't pass it why they've been talking about it since 1940 and everyone agrees that it's a question basically a state's rights well then what's the solution mr o'flaherty solution is for new york to reduce its tax eight cent city tax one cent state tax lower the tax take the profit and they move on they weren't in the business to the profit was there why wouldn't they move out if we cut the taxes you will make less money for cotton will that put you out of business no cut the taxes remove 80 or 90 cents whatever you have left a dollar forty do you know where you can get an item that costs three dollars and make a dollar forty profit on it i just think it's pretty rotten that we're gonna have to we're gonna say publicly now the cigarettes are something that should be taxed if you're gonna tax anything you would attack cigarettes and liquor and things like that and uh we're gonna say publicly well they've won in this case the mob beat us [Music] we got inside a big time smuggling operation on the us canada border and the contraband the cigarettes there is so much money in the cigarette smuggling business from the u.s to canada that guys who formerly smuggled cocaine marijuana and heroin have switched to from cigarettes news america tonight with deborah norville and dana king and correspondents bob mcewen peter van sant and bill geist now from the cbs broadcast center in new york city deborah norville and dana king when we come back an america tonight undercover investigation on smuggling and you won't believe the cargo [Music] if you've been meaning to quit smoking now may be the time the clinton white house is considering hiking cigarette taxes to fund health care reform but in an america tonight undercover investigation bob mcewen found that when it comes to taxes and cigarettes sometimes what gets burned is the government before you make up your mind about a higher cigarette tax you should see what happened when another country raised its tobacco taxes the result was a booming industry that's raked in billions of dollars and created thousands of jobs though perhaps not exactly the kind you'd want on your resume meet jacques the smuggler he wears a mask drives a very fast boat and carries an automatic pistol in his pocket we first met him last winter smuggling contraband cigarettes into canada from the us he agreed to speak with us on the condition that we change his name and disguise his voice everybody is doing it this is an epidemic maybe 60 to 70 percent of the population around here are involved jacques says he made more than half a million dollars last year and there are thousands of others like him all along the canadian border with the u.s from washington to maine who made their fortunes thanks to high cigarette taxes in canada every night sometimes in the middle of the night i would get phone calls from constituents telling me mr budria we're being shot at don boudria is a member of the canadian parliament whose district includes the saint lawrence river otherwise known as smuggler's alley if there is a high level of taxes and if that level is higher than what consumers are willing to pay the border of any country would become very very porous could happen to your country it's happened to us nevertheless here in washington increasing american cigarette taxes has become the politically correct thing to do to raise money for the new clinton health care plan and to discourage smoking and let's face it if you're an anti-smoker it sounds reasonable just as it did here in canada when the canadians raised their cigarette taxes what did they ever size is okay earlier this year the price of a pack of canadian cigarettes peaked at more than five american dollars and of that more than three dollars were tax that's a lot of money for a pack of cigarettes twice what a typical pack costs in the us but at least did those high taxes convince canadians to kick the habit no last year smoking in canada actually increased for the first time in a decade and the government's hopes for more tax revenue well they went up in smoke too because what high cigarette taxes in canada did do was create a billion dollar smuggling industry all along the canada u.s border it's obvious that that boat is transporting tobacco products rod stamler is a former top officer in the royal canadian mounted police he's investigated cigarette smuggling on both sides of the border you see the truck moving as the boat's coming in well that uh that's a drop off and a pickup as canadian taxes skyrocketed so did exports of canadian brand cigarettes to the us canadian cigarettes which crossed the border tax-free because they were for sale abroad so did that mean american smokers were abandoning their winstons and marlboroughs for players in export a not quite what actually happened was this the vast majority of canadian cigarettes exported to the us didn't get smoked in the u.s at all they were smuggled right back where they started from in fact along this one stretch of the st lawrence river where it separates new york state from canada the traffic in contraband cigarettes was so great that smugglers were making a profit of a million dollars a day how many are here how many cases are it 55 we took a hidden camera to upstate new york to the single busiest stretch of the border for cigarette smugglers and is this the load that you'll take tonight or will there be other ones [Music] i have to kill you right i can keep a secret but it's no secret how much money is involved i mean for a guy like you how much money is this load worth you can make five grand a week and that's just the guy who drives the boat suppliers with marinas on the american side could net a million dollars a month in all smugglers here made more per day than the canadian division of general motors thousand fifteen hundred trips a day ron martel is the mayor of the once sleepy town of cornwall ontario which had the misfortune to be located right on smuggler's alley now you'd think that if there were that many boats on the river going back and forth as many times as you say it would be relatively easy pickings for the police on this side to say that guy that guy let's stop him our police officers would be committing suicide i can't put it any uh clearer than that they have ak-47s we have tp peashooters in many ways what's happened in canada with cigarettes is exactly what took place in the us during the bad old days of prohibition but in reverse here we've just gone back in time 60 years exactly the same scenario exactly the same problem except we're substituting cigarettes instead of booze and just as gangsters such as chicago's al capone controlled bootleg boos during the roaring twenties criminal gangs muscled their way into canadian cigarette smuggling cornwall civic center was the target of a machine gun attack a warning from the smugglers about exactly who controlled the river i'm not only upset now i'm angry [Applause] you have organized crime that is involved in uh fan shipping of those products onward to as far away as uh as vancouver and as far away to the east as newfoundland and when you're talking about organized crime you're talking about what we would consider to be the mob the mafia that's uh exactly what uh what i'm referring to it got so bad that in 1993 the coast guard was issuing memos in the afternoon to boaters telling him to get off the river by 5 pm but guns and illicit money were only part of the problem even more troubling was the determination of otherwise law-abiding canadians to avoid paying an unpopular tax even if it meant buying smuggled cigarettes with our hidden camera we got illegal cigarettes in toronto at corner stores bars restaurants even delivered with a pizza how much with cigarettes in some parts of canada it was estimated that 75 of the cigarettes smoked were smuggled and some of the people with speed boats and ak-47s even began to think of themselves as heroes it's a kind of revolt it's all the people in canada making a revolt and they are all on our side and how long will it go on how long is it going to take the government to wake up if they don't do nothing about the taxes i don't know when it's going to stop maybe never i was the first member of parliament to advocate a lowering of taxes and what's he going to do to ensure that we stop losing billions of taxpayers dollars i was accused of everything from being bought by the cigarette companies to being out of my mind but i knew that we had to take very very drastic measures good evening the federal government has a new plan to choke off tobacco's smuggling and drastic action is exactly what the canadian government took everyone earlier this year tobacco taxes were dramatically cut cigarettes that once cost more than twice the american price are now less expensive in canada than they are in the us and what was the impact along smuggler's alley in the space of 10 days or so after we reduced the taxes that all activity on that river disappeared even after all that's gone on here on the u.s border with canada higher cigarette taxes are still an important part of the clinton administration's health care plan the question is if american cigarette taxes do increase what will happen here on the us border with mexico the state of california says that when it raised its cigarette tax just two cents this year it triggered an illegal tobacco trade that could cost the state as much as 50 million dollars in lost revenue the best estimates are that a federal tax increase would send cigarettes smuggling all along this border into the billions when the clinton administration places higher cigarette taxes as a plank in their health care proposal to discourage smokers to raise revenue what would you say to them i would say be careful there is a threshold and if you cross that threshold you're going to create a huge underground industry you're going to pay the price don't do it i would advise them don't even consider it don't even consider it new jersey is the east coast's prime location for what is known in the trade as butt legging the smuggling of cigarettes up tobacco road better known as interstate 95 from low tax states like north carolina to high-tax states like our own the state of new jersey collects 176 million dollars each year in cigarette taxes but the state division of taxation estimates that new jersey loses between 10 and 16 million dollars more to cigarette smugglers don't look at it as 176 million dollars revenue in the state conference every year look at it the converse side of it of a theft of 10 to 16 million dollars a year we all have this attitude well it's harmless it doesn't hurt anybody but a theft of 10 million dollars in state revenue it's going to be made up somewhere and who does it hurt the average taxpayer matthew diamond runs one of the state's 109 cigarette distribution centers which affects the state's tax stamp to every pack of cigarettes legally sold in the state smuggling is bad for his business smuggling services has to have an effect these cities are brought in from out of state down north carolina as an effect people who buy less from our stores the retailers if they get involved with it will be buying less from us taxes are not being paid on these smuggler cigarettes the state is losing as well as the wholesaler smuggling also hurts the butt leggers themselves violence and hijacking among competing smugglers is fairly common prevost says and cigarettes are such a liquid commodity that they are ripe for organized crime traditionally speaking organized crime per se whether you think of it in ethnic lines or just an organization or grouping of people to commit an illegal act has been involved in so-called victimless or white-collar crimes prostitution book making narcotics cigarette smuggling is one of these crimes federal statistics brought out in congressional hearings indicate the cigarette smuggling is perhaps the fourth largest money maker for organized crime in this country but occasionally it gets messy after a 1976 tax division bust of a 26 000 carton smuggling ring this man was tortured and then murdered because others in the ring mistakenly suspected he was an informant he used a small caliber handgun and put rounds through kneecaps elbows things like that ultimately gave him the coup de grace it is serious business because you're dealing money that was the taxation division's largest case but since 1981 there have been 800 smuggling cases investigated and 40 percent of them have resulted in arrests this division of taxation vault is a good illustration of the problem thousands of cartons of contraband cigarettes are held here as evidence awaiting trial thousands more are kept until they are either auctioned or returned to the manufacturer these two packs of cigarettes may look alike but if you look closely you'll notice a difference the tax stamps this pack was bought legally in north carolina stamped there and then smuggled into new jersey north carolina charges a state tax of 2 cents per pack while new jersey charges 24 cents that's a 22 incentive for smuggling 22 cents may not sound like much but it amounts to two dollars and 20 cents per carton and with vans and car trunks filled with cartons that adds up this is a trunk of a vehicle that we stopped on the highways coming into our state and it shows well over a thousand cartons that were being smuggled into our state that's how much money in that truck uh tax loss to the state 24 2500 just one car one trip there's conversely the same amount of profit uh roughly a dollar or more per carton profit on the street in june new jersey raised its cigarette tax a nickel a pack that gives the state the second highest cigarette tax in the nation topped only by wisconsin's 25 cents a pack new jersey also has what's called the unfair cigarette sales act which says cigarettes can't be undersold right now the minimum price is 74 cents a pack a carton sells for seven dollars and forty cents here retail and four dollars and fifty cents in north carolina new jersey's recent tax increase was designed to bring into the state coffers an additional 36 million dollars in its first year but state taxation officials are now questioning whether the tax increase could ultimately mean a net loss to the state due to smuggling initial projections show a possible 25 to 35 percent increase in smuggling they say in large part due to the higher cigarette tax well statistically it's very readily apparent that the only states that do have this problem are the high tax states whether they're in the northeastern corridor or in the midwest where they have similar high taxes and you have the relatively close availability of cigarettes at a low tax rate within say a day or half a day's drive away being realistic you do have to anticipate that another factor which may contribute to increased cigarette smuggling is the budgetary problems of the federal bureau of alcohol tobacco and firearms or atf a 1978 law made smuggling more than 300 cartons of cigarettes over state lines a federal offense punishable by five years in jail and or a one hundred thousand dollar fine this stiff penalty and the bureau's subsequent cooperation with taxation departments throughout the country resulted in a decrease in cigarette smuggling prior to the 1978 law state taxation agents like these were unable to make an arrest out of state they would have to follow vehicles with jersey plates all the way from north carolina or call ahead with a description of the car in the process they often lost the vehicle and the contraband federal atf agents like joe bredehoff have jurisdiction regardless of the state so smuggling decreased in new jersey in 1979 and 1980 but since the fall of 1981 because of budget cuts atf has had to eliminate almost its entire tobacco enforcement it recently received a supplemental budget of 24 million dollars until september but none of that money is earmarked for tobacco bredhoff questions how much they will be able to accomplish between now and september we've mostly worked for the past 11 months as an intelligence gathering and then referred the information to the appropriate state agencies we've taken no active partner investigations and we haven't gone out and solicited any investigations that we had for three prior years marbles too this atf surveillance film shows one of the largest smuggling rings the bureau has been able to crack a new york city-based ring took orders directly from consumers for bootlegged cigarettes used a virginia distributor and drop points in storage garages in new york and englishtown new jersey by selling the cigarettes directly the bootleggers made the atf investigation more difficult it was very hard to first get into the operation and then offer the services to join the operation as an employee to find out actually who was funding the operation the indictments that came from this were wire fraud conspiracy conspiracy to violate the federal tobacco laws and this was our first ricoh indictment which was the racketeered influence and corrupt organization statute this is where they used an enterprise and this was a cigarette operation for illegal means and we're talking about a large conspiracy in a multi-million dollar nature but it remains questionable whether atf will be able to continue similar ambitious investigations although it is funded until september its future and some officials say ultimately the battle against cigarette smuggling looks dim