9 nabbed in NC to NY cigarette scam, which avoided $1.2 million in taxes, Feds say

File photo from WRIC-TV

RALEIGH, N.C. (WNCN) — Nine men – including five from Durham – appeared in court Wednesday after they were charged last week in a conspiracy to traffic in contraband cigarettes, officials said.

The plot involved moving North Carolina-purchased cigarettes to New York, where they were sold at a high profit margin with fake New York tax stamps, the U.S. Attorney said in a press release.

Officials said that large quantities of cigarettes were purchased in North Carolina, then had counterfeit tax stamps added and were then sold in New York and New York City — without paying the much higher taxes that apply there.

More than $1.2 million in New York taxes was avoided during the seven months of the scam, officials said.

The nine men — of which three are from New York – were indicted for conspiracy to traffic in contraband cigarettes, trafficking in contraband cigarettes, and aiding and abetting.

According to an indictment, from mid-June 2015 to mid-January 2016, the defendants and co-conspirators transported and sold about 22,205 cartons of contraband cigarettes, resulting in a total tax loss to the State and City of New York of approximately $1,224,947.50.

Because of a much lower tax on North Carolina cigarettes, the products were resold in New York at a lower cost in that market – still with a higher profit margin, officials say.

During the time period, the NC state tax was $0.45 per pack of 20 cigarettes, or $4.50 per carton of ten packs. While, the New York State tax was $4.35 per pack ($43.50 per carton), and the New York City tax was an additional $1.50 per pack ($15.00 per carton). The total combined excise tax for New York State and New York City was $5.85 per pack, or $58.50 per carton.

“By evading the New York State and New York City excise taxes, Defendants and their co-conspirators were able to sell the contraband cigarettes at a lower cost, and at a higher profit margin, than competing cigarette sellers in New York who complied with federal and state law,” the US Attorney said.

The indictment alleges that some of the defendants and co-conspirators owned or operated retail stores in North Carolina, which allowed them to make wholesale purchases of large quantities of cigarettes from wholesale dealers, far exceeding the quantities of cigarettes actually being sold at the stores to retail customers in North Carolina. Defendants and co-conspirators in New York would arrange for the purchase of contraband cigarettes from defendants and co-conspirators in North Carolina, the indictment says.

The contraband cigarettes were then transported by vehicle from North Carolina to various storage locations in New York.

The following men appeared in court on Wednesday:

Mokhtar Abdul Karem Khashafa, age 34, of Durham
Yousef Abdulla Mohamed Kaid, age 35, of Durham
Ibrahim Abdulla Kaied, age 39, of Durham
Taha Al Montaser, age 31, of Greenville, NC
Ahmed Al Montaser, age 30, of Staten Island, New York
Mohammed Nasser Ali, a/k/a “Mo”, age 50, of Durham
Jabbar Mazab, a/k/a “Obaydah”, age 38, of Brooklyn, New York
Bassam Saad, a/k/a “Sam”, age 31, of Syracuse, New York
Muhammed Labbid Al Haddawi, age 27, of Durham

The Grand Jury indicted the men on January 26.

The charges are punishable by up to 5 years imprisonment, a fine of up to $250,00, and a term of supervised release of up to 3 years.

The case is being investigated by FBI Raleigh with assistance from multiple other agencies.

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