raise taxes on smokes a little more and I might start my own ring. are there any equations available that calculate something like... when an illegal activity is worth it and factor in the punishment?

Feds: Cigarette tax cheats used eateries

Friday, April 13, 2007
By RAMON LUNA
JOURNAL STAFF WRITER

A contraband cigarette ring in northern New Jersey has been smashed and five people charged, including two from West New York, the Department of Justice announced yesterday.

Xiao Z. Qi, who used two birthdates, one in 1972, the other in 1975, and Zhi H. Lin, 31, also of West New York; Rong Chen, 30, and Song D. Xu, 33, both of Newark, and Yu Wang, 37, of Passaic, have been charged with conspiracy to possess and distribute contraband untaxed cigarettes.

Wang, Xu and Lin were arrested yesterday and are expected to appear in federal court in Newark today. Qi and Chen are being sought. The charge carries a maximum penalty of five years in prison and a $250,000 fine.

Chen and Xu own a Chinese restaurant in Newark, as does Wang. Authorities claim many of the untaxed cigarettes were sold through these and similar restaurants throughout North Jersey.

A joint investigation that included the West New York, Weehawken and Newark police departments, the New Jersey Treasury Department, Division of Taxation and the Office of Criminal Investigation led to this week's arrests.

The ring purchased $4.5 million in untaxed cigarettes and sold at least 150,000 untaxed cartons, defrauding the state of at least $3 million, authorities said.

Authorities say the suspects bought tax-free cigarettes from companies claiming to be affiliated with Native American tribes in New York. Some of the untaxed cigarettes were kept in storage facilities, including units in North Bergen and Secaucus, or sold directly to smokers, authorities said.

When conducting searches on the defendants' homes and restaurants, authorities said they seized $100,000 in cash and cases of contraband cigarettes.

Authorities say between May 2004 and May 2006 the defendants received 1,500 packages of tax-free cigarettes through the mail and from discount cigarette distributors who claimed to be affiliated with the Native American tribes.

Authorities say the defendants traveled to New York to purchase a large amount of cigarettes from about June 2006 to March 2007. New Jersey records show no sales tax was paid by any of the defendants, authorities said.

The defendants used the U.S. Postal Service as one of their methods to deliver cigarettes to their homes and Chinese restaurants in many towns, including Jersey City and Plainfield, officials said.

5 Accused of Peddling Untaxed Cigarettes in Jersey City and elsewhere in New Jersey

Associated Press 04.12

Authorities on Thursday said they cracked a ring that sold millions of untaxed cigarettes at Chinese restaurants and other locations throughout New Jersey.

Federal charges were brought against five people, while state and local law officers searched Chinese restaurants in Newark, Paterson, Jersey City and other towns suspected of receiving and reselling the cigarettes.

The cigarettes brought significant profits to the ring and others because they were sold without anyone paying the required taxes to New Jersey, according to charges brought by the U.S. Postal Inspection Service, one of several federal agencies involved.

The complaint lodged in U.S. District court charged that the group purchased, tax-free, at least 150,000 cartons, or 30 million cigarettes, for $4.5 million, and defrauded the state of at least $3 million in cigarette sales taxes.

"This ring operated in a lucrative underground market for contraband cigarettes," U.S. Attorney Christopher J. Christie said in a statement. "Our investigation is continuing."

The suspects are accused of purchasing tax-free cigarettes from companies claiming to be affiliated with American Indian tribes in New York State.

Such companies can purchase cigarettes tax free from distributors, as long as the cigarettes are sold on a reservation to tribe members for personal consumption. Cigarette packs sold in New Jersey must have official state stamps showing that they were taxed, Christie's office said.

State records revealed no such taxes were paid by the suspects, the office said.

Charged were Xiao Z. Qi, who used two birth dates, one in 1972, the other in 1975, and Zhi H. Lin, 31, who lived together in West New York; Rong Chen, 30, and Song D. Xu, 33, both of Newark and owners of a Chinese restaurant in Newark; and Yu Wang, 37, of Passaic, owner of a Chinese restaurant in Newark.

Prosecutors did not immediately have the names of any lawyers for the suspects.

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