Federal prosecutors on Long Island notched a small victory over New York’s booming illicit cigarette trade earlier this month, winning the conviction of black-market kingpin Rodney Morrison on racketeering conspiracy and weapons charges.
Morrison, who’s looking at up to 30 years in prison, turned an estimated profit of $35 million per month running the Peace Pipe Smoke Shop on the Poospatuck Indian Reservation.
Yet, astounding as that number is, it barely scratches the surface of a trade that’s long been one of New York’s biggest – and most deadly – public-policy embarrassments.
All told, New York’s Indian reservations move more than 300 million packs of untaxed cigarettes each year, taking advantage of the refusal of three consecutive governors to enforce a state law mandating the collection of taxes on all tobacco sold to non-tribe members.
This refusal has consequences far beyond the hundreds of millions of dollars each year in lost tax revenue – as a blistering report from the Republican staff of the House Homeland Security Committee detailed recently.
The report cites law-enforcement investigations that have linked the illicit tobacco trade directly to funding for al Qaeda, Hezbollah and Hamas – to the tune of millions of dollars a year.
And New York’s tribal smoke shops – abetted by complicit wholesalers and an absentee government – are among the smugglers’ major suppliers.
The margins, thanks to New York’s heavy cigarette taxes, are simply staggering: The report estimates that the reservation dealer, smuggler and retailer – the latter two typically from the same family-based network – split a profit of $39 for every carton of illicit smokes sold in the city.
Morrison, indeed, offered to post $56 million in bail upon his arrest in 2004.
Now the government is seeking to confiscate his assets, spread throughout several offshore bank accounts.
New Yorkers should be grateful: He, at least, didn’t seem to give anything away.