Troopers bust Russian cigarette operation in western Alaska

Posted: Tuesday, June 15, 2004

ANCHORAGE - After receiving several tips that cigarettes with Russian writing were being sold in Marshall, the village law enforcement officer busted a local shop.

The case involved 500 packs of Russian-manufactured Marlboros that were purchased over the Internet. The cigarettes were almost all sold illegally for more than a 400 percent profit, according to the Anchorage Daily News.

Marshall, a western Alaska village of 370 in the Yukon-Kuskokwim Delta, is too small to have its own troopers post, but Richard Ellis, the local village public safety officer, works closely with state law enforcement.

According to troopers, Ellis got several tips in April that a video store in Marshall was selling cigarettes with Russian writing on them. He started investigating with the help of the Alaska Department of Revenue's Tax Division, which handles the state's cigarette tax program.

Cigarettes are taxed a dollar a pack in Alaska. Residents can legally order cigarettes over the Internet but are required by state law to get a license from the Revenue Department first and purchase Alaska tax stamps for every pack of smokes they bring in, according to Johanna Bales, who manages the state's tobacco tax program.

The intent of the stamp is to ensure that importers pay the state tax, Bales said. The shopkeeper in Marshall had neither a license nor stamps, troopers said.

The cigarette packs he was selling also lacked the required surgeon general's warning, Bales said.

"Even if they had a tax stamp on them, it's illegal to put a tax stamp on them" without that health warning, she said.

On May 12, Ellis seized 15 packs of Marlboros from the shopkeeper - the last of the 500. The shopkeeper could face felony charges for importing illegal and untaxed cigarettes into the state.

Charles King, a state tobacco and gambling investigator who assisted in the investigation, said the shopkeeper bought the cigarettes over the Internet from a distributor in Florida or Alabama for around $14 a carton, or $1.40 a pack, and then sold them for about $6 a pack.

"He made good money," King said.

Trooper Karl Main said he wasn't too surprised to hear that there were black-market cigarettes in rural Alaska. With higher prices and less law enforcement than most places, "rural areas can become somewhat of a popular ground for this type of behavior," he said.

Tobacco taxes put about $47 million into Alaska's coffers annually, according to Bales, the program manager.

State and federal officials don't know how much revenue is lost to illegal sales. Bales said that in 2001, two businesses in the Lower 48 that sold cigarettes over the Internet revealed, at the state's request, how many customers they had in Alaska. One company reported selling cigarettes to 600 individuals in the state over a 13-month period. The other showed 400 over a 10-month period.

The state believes it lost about $600,000 in unpaid taxes in those two cases alone, Bales said.

"This is serious business," she said.

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