United States Flag
Official Website of the Department of Homeland Security

Report Crimes: Email or Call 1-866-DHS-2-ICE

Financial Crimes
11/09/2011

Massachusetts man charged with importing and selling untaxed cigarettes

Alleged scheme said to cost Rhode Island millions in lost tax revenue

PROVIDENCE, R.I. – A Massachusetts man was arrested Wednesday and charged with importing and selling hundreds of thousands of packages of contraband cigarettes in Rhode Island following a five-state joint federal-state investigation involving U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI).

The arrest of Mohamad Mohamad, 35, of Cambridge, Mass., followed multiple search warrants in four states Tuesday and Wednesday. According to investigators, the alleged importation and sale of contraband cigarettes cost Rhode Island millions of dollars in cigarette tax revenue.

A nearly year-long investigation by ICE HSI; the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF); and the Rhode Island State Police High Intensity Drug Trafficking Area Task Force (HIDTA) culminated with federal search warrants at storage facilities in Warwick, R.I., Richmond, Va., and Columbia, S.C., and at Mohamad's Massachusetts residence. 

Federal agents seized approximately 10,000 cartons of cigarettes from the storage facility in Rhode Island, 4,000 cartons from the storage unit in Virginia, and as many as 400 cartons in South Carolina. Agents also seized approximately $32,000 and various documents from Mohamad's residence, as well as $15,000 from three bank accounts.

Rhode Island State Police conducted state search warrants at five locations while more than two dozen teams of state troopers, local law enforcement officers, and Rhode Island Department of Revenue's Division of Taxation conducted administrative inspections at retail outlets where contraband cigarettes were allegedly resold.

According to court records, an investigation which began in December 2010, determined that Mohamad allegedly traveled regularly to North Carolina, South Carolina, and Virginia to purchase large quantities of cigarettes from retailers and wholesalers for resale to convenience stores and independent salespersons in Rhode Island. It is alleged that none of the packages of cigarettes resold by Mohamad contained Rhode Island tax stamps. Mohamad is not licensed to sell cigarettes in Rhode Island.

Rhode Island state law requires a valid tax stamp on each package of cigarettes sold in the state. Each tax stamp represents approximately $4.00 in Rhode Island tax revenue. The tax in South Carolina is $.57 per pack, in North Carolina the tax is $.45 per pack, and in Virginia the tax is $.30 per pack.  North Carolina and South Carolina do not affix state tax stamps on the packages.

Mohamad made an initial appearance in U.S. District Court on Tuesday on a criminal complaint charging him with transporting and selling contraband cigarettes; money laundering; possessing fraudulent state tax stamps; and Interstate travel with the intent to manage and distribute proceeds of unlawful activity. On Wednesday, U.S. District Court Magistrate Judge David L. Martin ordered Mohamad released to home confinement, that his whereabouts be electronically monitored with the use of an electronic monitoring ankle bracelet, and that his passport be surrendered.

U.S. Attorney Peter F. Neronha, District of Rhode Island, acknowledged that a criminal complaint is merely an allegation and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government's burden to prove guilt beyond a reasonable doubt, according to Neronha.

The case is being prosecuted by Assistant U.S. Attorneys William J. Ferland and Sandra R. Hebert. They have been assisted by federal prosecutors in the Districts of Massachusetts, Eastern Virginia and South Carolina.

ICE HSI, the ATF and HIDTA agents were assisted in the investigation by various federal, state and local law enforcement agencies in North Carolina, South Carolina and Virginia and the Internal Revenue Service, Warwick Police, Massachusetts State Police and Cambridge (Mass.) Police.

ICE HSI participates in the federally-funded Rhode Island State Police HIDTA which includes members of law enforcement from the Rhode Island State Police, the ATF, the Drug Enforcement Administration, the Rhode Island National Guard, and the Johnston, Pawtucket, Providence, and Smithfield police departments.