Glendale police said Tuesday that they have broken up a tobacco smuggling ring that is believed to have sold millions of black market cigarettes imported from Mexico, avoiding payment of nearly $8 million in state and federal taxes over the past two years.
Fourteen people were arrested last weekend and about 4,700 cartons of illegal cigarettes were seized at locations in Los Angeles and San Diego counties, culminating a three-month investigation by Glendale police, the state Board of Equalization and other agencies.
The smuggling ring, based along the Mexican border, was one of the largest of its kind, officials said. It had a distribution network that sold cigarettes at below-market prices on street corners, out of the trunks of cars and from catering trucks across Southern California.
"We estimate they were operating for about two years, selling anywhere from 7,000 to 12,000 cartons of untaxed cigarettes per week," Glendale Police Lt. Ray Edey said.
State and federal sales and excise taxes on a carton of cigarettes total more than $7, so the operation is believed to have evaded more than $70,000 in taxes per week, he said.
Glendale police launched their investigation in December after a police officer noticed about 200 cartons of cigarettes stamped "not for sale in U.S." in a motorist's car during a routine traffic stop.
Investigators said they traced the smugglers to a public-storage facility in San Ysidro, near the U.S.-Mexico border, where they stored the cigarettes before loading them into cars and vans for shipment to Los Angeles and other destinations. Seven cars, about $3,200 in cash and a large quantity of illegal pharmaceuticals believed smuggled in from Europe were also seized, officials said.
The bulk of the cigarettes were American brands manufactured for export only and sold duty-free at warehouse-style stores near the border. But some were Mexican-made versions of Marlboro, Raleigh and other brands.
The smugglers bought the cigarettes for roughly $6 to $9 a carton and resold them at $12 to $15, investigators said.
Officials with the state Board of Equalization, the agency that oversees cigarette tax enforcement, said black-market cigarettes began appearing in 1989 after the enactment of Proposition 99, which raised the state tax on a pack of cigarettes from 10 cents to 35 cents.
"Overall, cigarettes generate about $700 million annually in sales tax, said John Ledford, spokesman for Board of Equalization member Ernie Dronenburg, who represents the area between Long Beach and the Mexican border. "Our best estimate is that the annual impact these smugglers have is somewhere between $50 million to $125 million lost to the state, but we don't have a handle on exactly how much illegal traffic there is out there," Ledford said.